Robb on Cooperation

Taxi cooperatives abroad

Posted by Alan Robb on 29 September 2009 | 0 Comments

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With rising fuel costs, diminishing oil supplies and a growth of inner city living, it is becoming increasingly likely that public transport in general, and taxis in particular, will play a more important role in our lives.

There are some clear signs that taxi cooperatives are providing the lead overseas. Conventional petrol or diesel vehicles are being replaced with hybrid-electric vehicles (HEVs).

In San Francisco in 2005, the Yellow Cab Cooperative was the first to get a fleet of fuel-efficient Ford Escape hybrid sport utility vehicles.

Who says cooperatives are less enterprising than investor owned businesses?

Other taxi companies are now following suit. It has been estimated that within five to ten years all New York cabs will be HEVs or some other type of alternative vehicle.

In Madison, Wisconsin, Union Cab is a worker owned taxi company. It began in 1979 after a failed labour action left workers idle when the employer closed the business rather than honour a labour contract.

Who says the founders of a cooperative are rooted in the past and unwilling to seek a better deal in a competitive environment?

Today, Union Cab has over 200 worker-owners and is a financially strong cooperative. It operates quite differently from investor-owned US cab companies which earn their income by daily leasing their vehicles to independent operator drivers.

The lease generally includes one tank of fuel, a set number of miles and despatch services. Drivers then have to pay for all other services such as credit card service, account charges, additional fuel etc). This pressures the drivers to cut costs, work long hours and may result in less than a fair hourly income.

As a worker cooperative, Union Cab has a commitment “to create jobs at a living wage or better in a safe, humane and democratic environment by providing quality transportation services in the greater Madison area.”

Notice that it is not about being the most efficient or most profitable company. Nor does it use the meaningless marketing jargon of “striving for excellence” or “empowering stakeholders”.

This commitment results in higher than industry-average costs for wages, safety costs and democratic governance costs.

Despite this, Union Cab generates a higher profit margin than the industry average. Revenue per mile is very close to the national average (as would be expected in a competitive industry) but expense per mile is below average.

Who says cooperatives can’t be run in a business-like way?

The co-op’s policy of maximizing savings and lowering its reliance on outside financing minimizes its interest costs.

Members’ equity is built up for asset renewal by retaining profits, even after paying above average wages.

It would seem that Union Cab has not fallen for the financial world’s mantra that wages should be minimized and debt finance should be maximized.

Union Cab also reports at least three times a year to the members – an extra cost no doubt, but an essential part of the process of communication with members.

Members are also welcome to attend and participate at any board or committee meetings.

I hope that we will see the growth of similar cooperatives in New Zealand as public transport grows in the twenty-first century.●

— from the June/July 2007 Cooperatives News