While 2019 appeared to be a banner year for the economy, the rate of freight company closures was disheartneing. Approximately 800 freight-hauling companies closed in 2019, more than double the previous year, along with the largest bankruptcy in the industry to date.
“This isn't the first time this year we've seen a trucking company fail and drivers abandoned. That's been happening a lot in 2019,” Gaines Law Group transportation attorney Cassandra Gaines reportedly said. “Celadon is a little bit of a different story — it's hard to tell how much that had to do with fraud and how much to do with our market.”
Ranked among the largest trucking companies in all of North America, Celadon had a working fleet upwards of 3,300 tractors and about 10,000 trailers. The abrupt closure left 4,000 men and women without jobs, and truckers searching for available positions and calling friends in the industry for short-term work.
“So, every company driver and owner-operator lost our jobs today without being notified about the closing of the doors of this mega-company,” trucker Roderick Orr reportedly posted on social media about the incident. “A lot of people I know are stuck all around the country trying to get home and look for another job.”
Why Are More Trucking Companies Closing?
In 2018, trucking companies enjoyed strong demand, and robust shipping rates saw only 310 companies close, with a modest 2,800 trucks being sidelined. Even with stringent on-duty regulations and electronic monitoring, freight haulers were able to tighten capacity and move profits forward. But issues such as higher insurance rates raised expenses, and the tariff war with China reportedly softened demand for goods and products.
Fleetwood Transportation, for example, shuttered operations Dec. 31, 2019, pointing to rising insurance costs as a primary reason. The closure put 240 CDL professionals out of work. According to Freight Waves, the Fleetwood board chairman sent out a memo stating the company was unable to secure coverage.
“Insurance carriers know that if there is a fatality involving a truck, juries will be sympathetic towards the (non-trucking) injured party and may reward damages in the nuclear category regardless of fault,” Chad Eichelberger, founder of trucking industry insurance provider Reliance Partners, reportedly said.
As 2020 rolls out, freight hauling organizations can anticipate that premiums are likely to triple if a fatal accident occurs. Even small carriers with an unblemished record often pay $5,000 to $7,000 per truck for coverage. Big metropolitan-based trucking companies can spend upwards of 30 percent more on higher rates.
U.S. farmers, manufacturers, and ultimately consumers have suffered considerably from the trade war initiated by the Trump administration and its imposition of tariffs against China in 2018. While a "cease-fire" of sorts was initiated with a new trade agreement signed in January 2020, it does little to reduce the overall tariff levels and appears unlikely to affect the slowing of economic growth that has depressed the trucking industry within the United States.
Additionally, the outbreak of Coronavirus and has created a worldwide economic downturn. This incident highlights that trucking industry companies remain vulnerable to disruption they have little to no control over.
Warning Signs A trucking Company May Be Closing
It’s obvious the weekly salaries of truck drivers can be impacted by a wide range of factors. What makes that a tough pill to swallow is that the men and women of the road show up each day to deliver the goods and materials that keep our country running. In these uncertain times, it’s crucial to remain vigilant and watch for indicators a carrier may be faltering. You may discover that the earliest signs are subtle, but they can get increasingly more apparent as a carrier nears the end.
Driver & Other Worker Perks Eliminated
Upper management will be the first to look at the books and recognize business is backsliding. The folks in the suits are unlikely to chop their bonuses or rollout back the expensive lunches as the first line of defense. Companies usually start chipping away at the little things that buoyed employee loyalty. These may include free coffee in the breakroom, a paid day off on your birthday, or throwing you a few overtime hours in the warehouse. When your employer cuts seemingly inexpensive benefits, there may be a bigger money problem.
Vendors Complain About Late Payments
When you see the IT people hanging around looking for a check or the fuel station your company regularly uses is complaining about their monthly installment, that’s a telltale sign the company is moving money around to weather a financial storm. Don’t be surprised if administrators toe the company line that there was a bookkeeping error, and all is well. When vendors aren’t getting paid on time, there’s usually a revenue shortfall.
Middle Management Starts Interviewing Elsewhere
Management folks are not on the same career track as truckers. The younger ones, usually at the tail end of management, often stay in one position until they gain enough experience to apply for a better paying job. These folks come and go. But the ones who have been with the company for a considerable amount of time with roots in the community may leave because they see that the ship is sinking. If more than one middle management person starts interviewing, they probably know something the truck drivers do not.
Closed Door Meetings
When a crisis hits any company, secretive meetings take place. Administrators will literally close the doors knowing tempers are going to flare. The last thing upper-management wants is to cause a panic and for drivers to find another trucking job while they still need your labor. If something seems amiss and secrets are being kept, it may be time to research jobs boards such as CDLjobs.com to see what jobs fit your needs. Better to know your industry value and be prepared than suffer short-term unemployment.
Truckers always know when the company is busy. Your trailer is at capacity, and they are calling in stop-gap help. Then there are the typical seasonal slowdowns. But when the work cycle seems unusually slow or spotty, trust your instincts. Houston, we may have a problem.
While those signs are certainly reason for concern, there are others that are unmistakable. When your employer enters the death throes, these are reasons to promptly consider applying for a new truck driving job.
Your Fuel Card Gets Declined
The fuel card is the lifeblood of long-haul delivery. If your card gets declined and your boss cannot rectify the issue over the phone quickly, that may mean they don’t have the operational cash to continue business for much longer.
Your Paycheck Bounces
Many of the end-of-days signs have to do with financial shortages. If your money isn’t downloaded electronically into your account or a physical check is no good, the party may be over. Do what you can to recover the revenue and find another position.
Your Employer Files for Bankruptcy
When large freight outfits file for bankruptcy, there is likely to be some industry news circulating. Smaller companies may fly under the radar to some degree. It’s not unusual for a business to file Chapter 11, which means they are “reorganizing.” Vendors and those the company owe money to will be notified, and drivers are likely to know relatively quickly. When a company files Chapter 11, work is unlikely to stop right away. And, the company may rebound from the financial issue. By that same token, consider your own future.
Know Your Truck Driver Career Options At All Times
The recent closures have left too many of our valued truck drivers looking for work without notice. This unfair practice by some employers demonstrates that CDL professionals would be wise to keep their eyes and ears open on the job, as well as periodically check on the opportunities emerging within the trucking industry.