Sterling Transit, a longtime California trucking firm, had an enviable safety record--the company won a safe-driving award from the California Trucking Assn. last year--but it wasn't enough to steer it away from disaster.
Last November, the 57-year-old Montebello trucking company slammed into a mountain of debt and closed its doors, one of 1,000 trucking firms nationwide to do so last year.
Ten years after the federal government lifted most of its restrictions on interstate trucking, the industry is still in turmoil. Intense competition among trucking companies has led to vicious rate wars that have weakened some firms and wiped out thousands of others.
Besides fighting it out among themselves, a large number of trucking companies face increased competition from railroad intermodal networks. With special flat cars, railroads transport container cargo inland after it arrives on ships from overseas.
A few years ago, virtually all container cargo was shipped by truck. But now, said Bernard Campbell, a transportation analyst with the consulting firm Data Resources in Cambridge, Mass., "the railroads have gotten their acts together. In many cases, they are just as quick and cost-efficient as trucks."
Trucking executives said in interviews that when the lengthy, post-deregulation shakeout is finally over, only two kinds of companies--nimble local firms and national giants--will remain. These executives said continued rate wars will drive regional firms--such as Sterling Transit--out of business, or into the arms of larger, acquisition-minded competitors.
Jerry Lundberg, owner of Sterling Transit, said deregulation helped kill off his firm. Lower-cost, non-union trucking companies were able to attract his regular customers with lower rates. Last year, Sterling lost 10 accounts worth a total of $300,000 a month--one-quarter of its monthly revenue. "We simply couldn't compete," he said.
Other companies have disappeared through mergers. In California, one of the strongest regional carriers, Viking Transit of San Jose, was gobbled up in 1988 by Roadway, one of the nation's top three trucking companies. More recently, Los Angeles-based Transcon agreed to buy Coastal Corp.'s money-losing ANR Freight Systems in a deal that would create the country's fourth-largest trucking firm. (The acquisition is being contested in federal court, however, by an Illinois investment firm that claims Coastal had agreed to sell ANR Freight to it.)
Deregulation has not been a disaster for all trucking firms. Given the freedom to operate anywhere in the country and to set rates, a number of companies have grown and prospered. The big firms, such as Consolidated Freightways, Roadway and Yellow Freight, have especially benefited from deregulation because they have the financial wherewithal to withstand rate competition and the size to compete in many markets.
Smaller firms have grown in a deregulated marketplace by carefully selecting their market and watching costs. Donald Freymiller, owner of a Bakersfield firm that transports refrigerated freight, said deregulation has allowed his company to grow from 95 trucks in 1980 to 625 today. "Those who cry foul haven't learned how to curtail costs," he said.
Consolidated Freightways, based in Palo Alto, has probably pursued the most aggressive expansion plan since deregulation. It has broadly diversified from basic long-haul service into regional trucking, ocean shipment and air freight, evolving from simply a trucking concern into a well-rounded transportation company.
Consolidated's February, 1989, acquisition of Emery Air Freight, for example, is an integral part of the company's plan to expand in Europe. Consolidated President and Chief Executive Lary R. Scott envisions a network that would fly goods from the United States to Europe on Emery, then deliver them on Consolidated's trucks.
Other large trucking companies have taken a more conservative approach.
Yellow Freight, the nation's largest trucker, has no intention of straying from its specialty, long-haul trucking.
Bob Burdick, Yellow Freight's marketing vice president, said part of the reason that Yellow, headquartered in Overland Park, Kan., has not diversified is that it was not prepared when deregulation occurred. Unlike its chief rivals, Consolidated and Roadway, it lacked a terminal and communications network and needed to play catch-up to compete with them.
"We will continue to emphasize our core business" and, unlike Consolidated, "we will not set up regional companies," Burdick said. "Each company is pursuing its own strategy and, in time, the stockholders will decide which was the correct course of action."