Advertisement
YOU ARE HERE: LAT HomeCollections

Freight Line to Close Its U.S. Operations

Trucking: Consolidated Freightways says it will file for bankruptcy protection. 15,500 workers will lose jobs.

September 03, 2002|DON LEE | TIMES STAFF WRITER

Consolidated Freightways Corp., one of the nation's largest trucking firms, said Monday that it was shutting down its U.S. operations immediately and would move to liquidate the business.

The 73-year-old company, noting that it could not secure needed financing, said the action would put 15,500 people out of work, 80% of them right away. The company conveyed the news on Labor Day to many employees by directing them to call a toll-free number, which had a recorded message from the company's chief executive, who grimly told workers not to report for work today.

More than 1,900 employees in California will lose their jobs, many of them at Consolidated's huge terminal in Mira Loma near Ontario Airport.

"I'm frankly shocked," said John Husing, an economist who specializes in the Inland Empire, a national hub for transportation and warehousing. Although other freight carriers such as Yellow Corp. are expected to fill the void, Husing nonetheless described the loss of the Mira Loma operations as a significant blow to the goods-movement support system for Southern California.

In a news release Monday, Consolidated Freightways said it would file for Chapter 11 bankruptcy protection today, along with filing a quarterly financial statement that it had delayed. Though a Chapter 11 filing is normally used to reorganize debt and continue operating, a company spokesperson said it would allow management to dispose of the business more quickly.

Consolidated said operations of the CF AirFreight and Canadian Freightways Ltd. subsidiaries are continuing.

Consolidated, which has been struggling for some time, had been in discussions with lenders to obtain additional financing--an amount that was not released. But what apparently pushed the company over the edge was an abrupt cancellation by one of the company's surety bondholders of coverage related to Consolidated's self-insurance programs for workers' compensation and vehicular casualty, which a spokesperson said created an additional $30-million-to-$35-million gap.

"I'm sorry for this action, but we have no other choice due to a lack of financial resources," John Brincko, Consolidated's chief executive since May, said in his recorded message. He said the company would ask the Bankruptcy Court to enable the company to pay the two weeks' wages owed to employees as soon as possible.

Employees at Consolidated, most of whom are represented by the Teamsters union, will not receive additional severance, said spokeswoman Sandra Sternberg, speaking from the company's headquarters in Vancouver, Wash.

Teamsters officials could not be reached Monday for comment, but rumors had been swirling in recent days about the company's deepening troubles. The company said last month that it may be delisted from Nasdaq because of its failure to file its second-quarter report on time. The company, with annual revenue exceeding $2 billion, has lost more than $146 million during the preceding six quarters.

Additionally, the company was one of 16 firms that hadn't certified financial results due by Aug. 14.

Economists attributed part of Consolidated's financial woes to the depressed economy. But the company also was unable to compete with major rivals such as Yellow and a host of smaller independent truckers in major markets such as Southern California.

Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said there are plenty of other companies that will pick up the slack. And as such, he said, Consolidated's shutdown won't have a big effect on the state economy.

Even so, some of Consolidated's customers will have to switch carriers and could feel some disruption during the transition. Consolidated said it would continue to make deliveries that are in transit or in terminals. The company operates nearly two dozen terminals throughout California.

Consolidated Freightways has been the third-largest of the so-called less-than-truckload companies, which enable truckers to consolidate various shipments. Many smaller businesses rely on such companies because they don't have enough volume to fill a truck but need speedy delivery.

Advertisement
Los Angeles Times Articles
|
|
|