Two trucking companies abruptly closed down in the past several weeks, leaving truckers stranded on the road. And it couldn’t have come at a worse time, just before Christmas.
The economy is usually blamed for a business shuttering. But in these cases the cause may be more about mismanagement.
G.D.S. Express, an Akron Ohio based trucking company, shut down without warning on Dec. 17. G.D.S.’s recruiting manager, Mike Cady, notified truckers, “It is with HEAVY heart, fighting anger and tears that I send this message. Unfortunately, through mismanagement from ownership, GDS is closing our doors.”
Another manager is quoted in Truckers News as saying that the company president had briefed them but gave no rational explanation for closing abruptly. ‘”We were blindsided,” said Jacob Keaton, eastern operations manager at G.D.S, which runs 75 trucks, according to FMCSA data. “We’ve heard no rational explanation in the last 48 hours.”‘
Truckers had to scramble and begin looking for new jobs. It’s a familiar sad story of company closures.
But with trucking companies closing, the impact goes beyond people out of jobs with no severance pay and worried how they will make ends meet — as bad as that is. Trucking company closures are worse. They can literally leave workers stranded on the road far away. Fuel cards no longer work. Some drivers end up paying out of pocket to buy fuel to drop off their loads and return home.
G.D.S.’s situation came just two weeks after another trucking company, Celadon Group Inc., filed for Chapter 11 bankruptcy and shuttered. The closure came after two former senior executives were indicted for financial fraud.
Celadon had been reeling since 2017 when news of financial wrongdoing first surfaced. The company, at one time listed on the New York Stock Exchange, was delisted and relegated to penny stock status [OTC:CGIP].
Both cases show little regard for the truckers or back office employees involved. Celadon, for instance, was recruiting people right up to the bankruptcy filing. Committed managers and back office employees stayed on to try to help stranded truckers.
Why Are Trucking Companies Closing?
There are a lot of trucking companies out there. Small businesses dominate the industry. Per the American Trucking Associations (ATA) statistics, 91% of trucking companies operate 6 or fewer trucks. And 97% operate 20 trucks or fewer.
Last year (2018) was a record revenue year for the trucking industry. Revenues in 2018 topped $796.7 billion, an increase of roughly 14% over the $700.1 billion the previous year, says the ATA.
Yet that changed abruptly. For example, in 2019 almost 800 trucking companies failed — more than double the rate of 2018.
Why did 2019 see so many trucking companies closing, despite the booming U.S. economy? According to Frank Holmes, CEO of US Global Investors, it’s because of over-expansion, high costs and reduced prices.
“Flush with cash, managements did what some other industries have been guilty of doing in boom years — they began to expand aggressively. Capacity growth exploded, and spending on drivers’ pay surged. Among the things they didn’t anticipate in 2019 were escalating insurance costs and oversupply, which drove shipping rates down at the fastest pace since 2016. The U.S. trade war with China didn’t help either,” Holmes writes at Seeking Alpha.
He goes on to suggest the trucking industry take a page from the airline industry’s playbook. Make fundamental changes. Go for more fuel efficiency. Find new revenue sources. Be more disciplined when it comes to growth.
And what about the drivers and owner-operators who are out of work? A bit of good news is that other trucking companies were using the comments section of news articles to recruit truckers of the failed G.D.S. See comments here and here. Somehow, those other trucking companies seem to have figured out the secret to doing well.
There’s also a Facebook group for former Celadon workers.
Everyone has an opinion, from overexpansion to overregulation. But one industry person opined in the comments, “it’s mismanagement, inside theft and embezzlement that causes a lot of the companies to shut down and strand their great drivers.”
Get the latest headlines from Small Business Trends. Follow us on Google News.