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Moving companies hit some bumps in the road

Fuel prices and the housing slump threaten the bottom line

May 23, 2008|Ronald D. White | Times Staff Writer

May is pivotal for moving and storage companies. It's when families plan summertime relocations to new neighborhoods or cities, hoping to minimize disrupting their children's lives.
So far, May looks pretty grim. "We'll usually get 250 calls through our office in May from people trying to schedule a move. At the rate we are going, we'll be lucky to get 100 calls," said Frank Rolapp, president and co-owner of Beverly Hills Moving & Transfer Co.
"We've just come out of one of the worst winters I can remember, and now this. I think a lot of people in this industry will be going out of business this year."
Moving companies are idling at the intersection of two big problems for the economy: high fuel prices and the real estate slump.
Gasoline is selling in California for an average of more than $4 a gallon, and diesel is averaging nearly $5 a gallon -- $1.75 more than a year ago -- while home sales are down.
"There are not as many people moving. That's what is happening to these companies. People are staying put," said John Husing, an economist who specializes in the Inland Empire.

The effect on Beverly Hills Moving & Transfer, which has 360 drivers and other workers, will be deep, Rolapp predicted, with maybe 100 to 150 moving jobs this summer rather than the usual 250 or so.

The storage side of the business is hitting fewer bumps in the road. With about 360,000 square feet of space in various locations, the company is benefiting from contracts with professional sports teams, celebrities, businesses in the entertainment industry and individual estates, Rolapp said.

"These clients, they seem to keep their records forever and they keep adding to them," he said, which is good news for his company. Still, revenue will drop to about $15 million this year from about $25 million before the slump, Rolapp said.

At Andy's Transfer & Storage in Glendale, which has 10 employees, revenue will probably be down this year from the $3.7 million the company made in 2007, said Jill Longo, its chairwoman.

"Before, there was a lot of business expansion going on. Now, about 20% to 30% of it is companies moving to get into something less expensive, moving out of downtown and into the Valley," she said. "There are a lot of downsizing moves right now. We go in, disassemble office cubicles and put them into storage."

Longo said she had been looking "at everything" to find cost savings -- "our phone contracts, office supply purchases, how much we are paying in fuel and where our guys go to fuel up."

Both companies are aided by their long track records in an industry riddled with unscrupulous operators and by several service awards from the giant moving companies with which they are affiliated, helping them hold on to business.

And it could be worse, Longo said. "The companies that do nothing but household moves are really struggling," she said. "We know of one company in Northern California that is selling one truck a month to make payroll. They are selling off their assets."

California moving companies are regulated by the state Public Utilities Commission. One of the problems moving companies face is that, unlike other industries and businesses, they are unable to impose fuel surcharges to mitigate some of the sting of record fuel prices, said Steve Weitekamp, president of the California Moving and Storage Assn.

Compounding that, he said, is the fear among many companies of overpricing their services at a time of sharp competition for declining business.

"There's been a dramatic decline in business, and some companies are putting off their paychecks. It's a difficult time," Weitekamp said.

The bite of those fuel prices has become almost impossible to bear.

"It costs over $1,350 to fill up those 300-gallon tanks, and they are filling those tanks every 800 miles," Rolapp said.

The bottoming-out of the real estate market sent the international holding company that both Longo and Rolapp work with fleeing into bankruptcy. Longo's company operates through connections with North American Van Lines. Rolapp's works through Allied Van Lines. Both are brands of once publicly traded Sirva Inc., which filed for bankruptcy protection last year and recently emerged as a private company owned by principal creditors.

Sirva, based outside Chicago, not only took on the task of moving people, but it also took over the mortgages of the homes the families were leaving and even fronted customers money to buy their next homes in their new city. It found itself stuck with a growing inventory of homes that were rapidly losing value and rang up net losses of about $750 million over the last three years, according to the company's filings with the Securities and Exchange Commission.

Back in California, Longo and Rolapp are hoping to weather the bad times and hold out until a turnaround happens in the housing market and in the economy in general.

"It's tough, but we believe it's all a cycle," Longo said, recalling the difficulties her company survived during a recession in the early 1990s. "We're just hoping to pull through this one too."

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ron.white@latimes.com

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