Posted on: Tuesday, September 3, 2002
No. 3 trucker shutting down
By Rip Watson
Bloomberg News Service
VANCOUVER, Wash. — Consolidated Freightways Corp., the third-largest U.S. trucker, said it is shutting down operations and plans to file for Chapter 11 bankruptcy today, resulting in the loss of about 15,500 jobs.
More than 80 percent of those workers at the 73-year-old company will be fired immediately, the company said in a statement. At least four-fifths of the workers at the company are members of the Teamsters Union, which represents drivers, dockworkers and clerks.
Vancouver, Wash.-based Consolidated Freightways, which has had losses for seven consecutive quarters, named management consultant John Brincko chief executive officer in May, replacing Patrick Blake. Consolidated lost $104.3 million last year, while larger rivals Yellow Corp. and Roadway Corp. were profitable.
"We've known they were in trouble," said Jason Seidl, an independent analyst who doesn't own the stock or rate the shares. "This should have a very positive effect on other trucking stocks."
Those include Yellow, Roadway, Arkansas Best Corp., US Freightways Corp. and CNF Inc.'s Con-Way Transportation Services, which may add business. Others are Union Pacific Corp.'s Overnite Transportation and FedEx Corp.'s freight unit.
Operations of the company's CF AirFreight and Canadian Freightways, Ltd. units are continuing normally, and employees there will keep their jobs, the company said.
Consolidated Freightways shares closed at 71 cents on Friday after losing more than 65 percent of its value since Aug. 14, when release of its second-quarter results was delayed because Brincko said more time was needed to review them. The stock has fallen 87 percent in the past year.
The Chapter 11 filing will allow the company to continue operating with its current management while it shuts down, spokesman Mike Brown said. Canadian Freightways Ltd., a western Canadian carrier, will continue operations. Operations in eastern Canada are part of the U.S. company and will be shut down.
The decision to shut down was made after an insurer for workers' compensation and casualty claims canceled a surety bond and other funding couldn't be found, the company said in a statement. Earlier this year, General Electric Capital Co. extended a $45 million line of credit to provide money that was secured by the sale and leaseback of 39 freight terminals.
"Without the availability of further financing, the board of directors reluctantly concluded that the company simply could not continue to operate, pay employees and meet its obligations," Brincko said in a statement. Company officials weren't immediately available to comment.
