CALGARY, Alta. - In nature, when an animal dies nothing of the carcass is wasted, the strong pick the bones clean and stored energy is returned to the earth.In trucking, much the same situation exists...
CALGARY, Alta. – In nature, when an animal dies nothing of the carcass is wasted, the strong pick the bones clean and stored energy is returned to the earth.
In trucking, much the same situation exists when a fleet hits the industry’s jungle floor; and while it doesn’t take long for the fallen to be re-absorbed, whether or not the process is a healthy one probably depends on who you ask.
The freight fight
As fiscal belts continue to tighten, the dominant issue on the minds of fleets has become the life-and-death matter of finding freight.
Once one of Canada’s leading reefer trucking and warehousing operations, TCT Logistics is now under the control of court-appointed receiver KPMG. But more than a week before the Calgary fleet crumbled into receivership, its competitors became aware of the impending opportunity.
“There’s no doubt, from our perspective if there were opportunities we would want to pursue them,” says Guy Shields, general manager of VersaCold’s transport division.
“Certainly we’ve had calls from customers making inquires about our services and pricing.”
VersaCold, also based in Calgary, specializes in warehousing and temperature-controlled, less-than-truckload (LTL) freight and makes use primarily of third-party carriers sprinkled with a few contracted owner/operators to move its clients’ cargo along. Given the fact TCT mainly handles truckload runs, Shields admits his company won’t be among the big winners if the giant carrier simply vanishes into the ether.
“It will depend on what the receiver does,” says Shields, alluding to the fact the fleet may continue operating for some time under KPMG’s control. “The fact that it is happening in January when the transport business is generally down compared to the middle of the year means there is capacity available.”
He says this would make it much easier for the industry – and companies like his employer, which he estimates is only about one-sixth the size of TCT – to absorb the trucking giant’s customers.
He explains the amount of freight the TCT situation sends trickling down to remaining fleets largely hinges on what KPMG does.
“My understanding is, we’re being run by the receiver as a going concern,” says David Elder, TCT Logistics’ senior vice-president in charge of corporate development.
Too much, too fast
There’s a common theme among many of today’s failing fleets. Their recent past often includes a period of rapid growth in the late 1990s and into 2000.
TCT Logistics included Tri-Line Freight Systems, a truckload, LTL, and logistics firm covering Canada, the U.S. and Mexico purchased in April of 2000 for $44 million.
Fueled by $110 million in debt financing from GMAC and $23 million from the Ontario Teacher’s Pension Fund, TCT also bought the van and refrigerated trucking business of Kleysen Transport Ltd. for $18 million in cash, stocks and debt just one day earlier. This built on the 1998 acquisition of the Livingston Group’s grocery warehousing business. In a separate deal, the behemoth also swallowed popular Winnipeg-based Atomic Transportation.
The Salmon Arm, B.C.-based Hunterline Group, mirrored this rapid growth – yet on a much smaller scale. The firm, which includes Frontrunner Freight and Hunterline Trucking, decided it was time to call it quits only weeks after TCT.
According to one highly placed source at the company, “the organization took a very aggressive approach to growth,” between ’98-’00.
“The fact is, trucking is still very much a human resources business. Unfortunately we may not have had the people we needed or the systems in place to handle the growth.”
The big difference in Hunterline’s case: it wasn’t forced into the move by creditors, so everything occurred in an up-front basis.
“There are two roads you can take,” says a senior member of the B.C. fleet, which included 150 company trucks and an additional 75 O/O rigs to pull about 500 van and deck trailers. “You can be unwilling to cooperate with anyone, or you can be like us, we’re more than willing to work with everyone we can.”
Big lottery, few tickets
In Hunterline’s case, it had initially hoped to sell the trucking operation as a complete package, “But there’s not a lot of value in the equipment right now,” explains the company representative. “Especially when you consider all of the TCT stuff laying around right now.”
Similarly there had been wigwag-warnings on TCT’s corporate dashboard in the way of rumor. Whispers of a savior about to swoop in and buy at least a portion of the troubled operation were plentiful.
Laidlaw’s Contrans, McCain’s Day and Ross, as well as Bison Transport were among the most common names whispered around the playground.
As Truck News went to press, only one deal had been officially announced, when Montreal’s TransForce reached an agreement in principle to acquire selected assets of the Tri-Line Logistics division (freight brokerage), a portion of Tri-Line Expressways Ltd. The purchase is still subject to Ontario court approval.
“This acquisition will reinforce our presence in the market and is consistent with our strategic growth objectives,” states Alain Bedard, TransForce’s president and chief executive officer. It is expected the transaction will result in additional revenues of more than $25 million on an annual basis. TransForce had closed a deal last November with TCT to purchase its Daily division, which some industry observers are saying built a solid foundation of trust for the Tri-line deal.
Drivers and O/Os
Many were left without information to twist uncomfortably in the icy Prairie winds ripping across the region at that same time.
However, a source at Tri-Line did at least confirm to Truck News that drivers and owner/operators had their wages guaranteed. This flew in stark contrast to the fact that, as the fleet was spiraling downward, a number of cheques were bounced along the way.
“That has occurred,” the source says, “and it will be in the hands of the receiver as to whose (bad cheque) gets replaced and whose doesn’t.”
Gerald McManus has been a local driver in Winnipeg for TCT over the past few years having first joined the company some 25 years ago.
“Jan. 25, was pay day and all of us were paid,” he insists.
While McManus got his money, the lifelong trucker is still left to wonder whether his job will vanish anytime soon.
Tempers can flare
Bad as the uncertainty is, things could have been much worse.
Walter Szwajka, a five-truck O/O, says when Sureline Systems and Province Cartage went bankrupt he was out almost $50,000.
“One of the owners knew he was going to reopen and he knew he needed my power to do it,” says Szwajka. “He took me out for a beer, and explained how he was going to close the door and then reopen.”
In exchange for coming on-board with the new company, Industrial Motor Freight Lines Inc., the Brampton,Ont.-area trucker says he was promised the money he was previously due. Now he says the tab has only grown larger.
Kevin Skeffington, the fleet’s owner, tells a much different story. He doesn’t acknowledge any such deal existed and says as far as any of Sureline’s debts go, “(Szwajka) will have to deal with the trustees on that, that’s the law of the land.”
In regards to any bills Industrial has rung up with the O/O, Skeffington says the trucker is getting a little over-anxious.
“What I owe him, I’ll give him in 90 days,” as per the company’s agreement, he says, stressing, “no one is getting beat for a dime here with Industrial.”
He points out he is only trying to make the best of a bad situation.
“There was a bankruptcy and I was one of three partners,” says Skeffington. “I bought the assets and started a new company on my own on Sept. 18, 2001.”
Free to good home
By contrast, Hunterline put a great deal of effort into finding new jobs for its professional drivers.
“All of our deck drivers are already on with a Saskatchewan hauler,” says a key member of the operations department. He stresses the entire closure has been focused on people – not the banks.
“We’ve been contact
ed by a number of fleets and, in the case of those able to provide a similar lifestyle for our drivers, we’re distributing their (recruiting packages among the fleet),” he adds.