Consolidated Freightways Corp., the third-largest trucking company in the United States and the employer of more than 350 local workers, padlocked its gates Monday and announced it plans to file for Chapter 11 bankruptcy and liquidate all its assets.
The company, based in Vancouver, Wash., released a statement Monday saying that 15,500 jobs nationwide will be terminated.
More than 80 percent of those workers have been fired immediately, and the remaining 20 percent of the employees, consisting of supervisory and management positions, will be phased out. Consolidated's CF AirFreight and Canadian Freightways Ltd. subsidiaries will not be affected and will continue normal operations, the statement said.
The company is mailing out letters to workers explaining the action.
"We expected that recent discussions with our banks, other lenders and real estate investors would enable us to obtain significant additional financial resources," the letters said. "Unfortunately, this has not been the case."
Consolidated has been unprofitable for seven straight quarters and lost $104.3 million last year. In the first quarter of this year, the company suffered a loss of $36.5 million on $463 million in revenue. By contrast, larger trucking rivals Yellow Corp. of Overland Park, Kan., and Roadway Corp., based in Akron, Ohio, have reported profits for the same period.
In May, Consolidated replaced Patrick Blake, its chief executive officer, with management consultant John Brincko, but the troubles have persisted. The trucking company's stock has plummeted during the last two weeks, losing more than 65 percent of its value since Aug. 14, when company officials requested an extension in filing second-quarter earnings. In early 1999, the 73-year-old company's stock was trading on Nasdaq at more than $18. On Friday it closed at 71 cents.
"We've known they were in trouble," said Jason Seidl, an independent analyst. "This should have a very positive effect on other trucking stocks."
Consolidated Freightways is the nation's third-largest "less than truckload" transportation network. The company gathered partial shipments from multiple companies, loaded them together and then drove them all over the United States, Canada and Mexico. Consolidated operates 350 terminals and 30,000 trucks in North America.
At Consolidated's terminal on River Road in the Town of Tonawanda, workers did not have a happy Labor Day. Employees showing up fo Monday morning were met by security guards and padlocked gates.
James Farrell, a local driver who has been with the company for more than 23 years, said he received a phone call early in the morning from the terminal manager telling him that Consolidated would file for bankruptcy today. A teleconference call with the company at noon confirmed that employees would be terminated.
"Thank you for dialing in on this holiday weekend. I hope you and your family are enjoying the time together," Brincko says in the recorded message. "I have some extremely urgent and sad news to share with you today. . . . Your employment ends immediately."
Consolidated's local workers were not completely surprised by the news.
"The company's been struggling financially for two years, so we knew it was bad," Farrell said.
The truck driver said that for months workers had been told the company was courting possible buyers to help it dig out of its financial squalor but none expressed a serious interest. The situation took a turn for the worst when an insurer for workers' compensation and casualty claims canceled a surety bond. Lenders and investors backed off, and not being able to find any additional funding, the board of directors "reluctantly concluded that the company simply could not continue to operate, pay employees and meet its obligations," the company said in a statement.
Consolidated officials could not be reached for comment.
"We're all deeply disappointed," Farrell said. "In this area especially, it's just another slam to working people and organized labor."
Monday afternoon, Consolidated's River Road terminal was quiet, the company's fleet of 18-wheelers, proudly adorned with the giant red and green CF logo, looking abandoned and desolate.
A handful of employees, including Farrell, gathered in the company parking lot to speculate on why the company died and to console each other about their own impending unemployment.
"I'm going to try and get work at some of the other local companies that are under the union." he said. "That way I can keep my benefits and pension."
Consolidated employed nearly 350 workers from two unions, Teamsters locals 449 and 375, said Farrell, a trustee of Local 375. With so many local truckers out of work and with a slumping economy, he said finding a new job won't be easy.
"There will be 300 other guys out there looking for the same work," he said. "I'm not going to hold my breath waiting for the phone to ring off the hook."
Part of the company's problem, Farrell said, was that pricing on the freight was too low. Now, he said, millions of pounds of the company's freight need to be purged out of the system.
"Consolidated Freightways was hauling $2.2 billion of mispriced freight," analyst Seidl said. "This freight is going to have to find a home. Their competitors will say, 'we are going to haul that freight, but at a more expensive price.' "
Some workers blamed the company's failings on the deregulation of the trucking industry.
"Now, anyone who wants to buy a tractor-trailer and haul freight can do it. Deregulation has killed the industry," said a 22-year Consolidated veteran who would give his name only as "A.J."
The truck driver added that executives, not workers, should be held responsible for the company's demise.
"This is not the Teamsters' fault, it's poor management," he said. "They were showing $30 million in losses each quarter. Where was the money they were making going to?"
According to Farrell, Consolidated will hold teleconference calls with employees today and Wednesday to provide further information on the bankruptcy filing.
News wire services contributed to this report.