Consolidated Freightways: Looking Back

After the recent demise of Yellow Corp, I wanted to take a look back at the previous largest trucking bankruptcy and closure. During its prime, Consolidated Freightways operated an extensive network of more than 350 terminals and employed a workforce exceeding 15,000 individuals, encompassing truck drivers, dock workers, dispatchers, and management personnel.

The company held a prominent position as the leading long-haul trucking entity in the nation. However, its trajectory took a downturn, culminating in a notable event: one of the largest trucking bankruptcy filing in U.S. history. Consequently, the company ceased its operations in 2002.

Affectionately nicknamed "CornFlakes," the company also played a pivotal role in founding the Freightliner line of heavy-duty trucks, which is currently under the ownership of Daimler Trucks.

Founding, Early Challenges

Founded in 1929, by Leland James in Portland, Oregon, Consolidated Freightways (CF) started as a modest single-truck less-than-truckload (LTL) operation. In its early stages, James ingeniously merged four local short-haul carriers within the Portland area into a unified entity. Initially concentrating on the Portland vicinity, the company gradually expanded its reach into the broader region.

The trucking industry held a far less dominant position compared to its current formidable stature. Particularly in the Western regions, the scarcity of well-constructed roads hindered its advancement until the aftermath of World War I. The evolution of an extensive national network of interstate highways would eventually be necessary to propel the long-haul trucking sector forward.

Leland James' fledgling trucking enterprise initially directed its efforts towards establishing a presence in Portland and its immediate vicinity. As its achievements mounted, the company extended its routes, rapidly facilitating the transportation of goods between numerous far-flung cities across Oregon and Washington.

The Great Depression triggered a series of intense rate conflicts among trucking companies nationwide. As freight volume dwindled and rates plummeted sharply, competition intensified among the numerous trucking firms in the Pacific Northwest.

Many of these carriers were modest operations, and they were unable to stay afloat as conditions worsened, more substantial corporations like Consolidated managed to weather the lean period. In some instances, securing additional business from customers seeking more dependable and efficient delivery alternatives than those offered by smaller carriers and the railways.

In 1935, the federal government intervened in the somewhat disorderly rivalry among truckers by subjecting interstate carriers to the overarching authority of the Interstate Commerce Commission (ICC), an entity that had long overseen the regulation of the railroad industry.

Regulations

Consolidated Freightways had already solidified its position as a prominent trucking force in the Northwestern region, boasting an extensive network of routes that spanned Washington, Oregon, and California. By the late 1940s, the company's routes had expanded eastward to Chicago. By 1950, the company's operational fleet comprised around 1,600, revenues amounting to $24 million.

Due to ICC stringent regulations on rates and routes, Consolidated had achieved much of its growth through strategic acquisitions and mergers, by acquiring more than 50 of its former competitors.

Manufacturing

Following World War II, Leland James initiated the establishment of Freightliner Corporation. The primary purpose was to furnish Consolidated with larger, lighter, and more advanced trucks and trailers that were becoming increasingly essential for thriving in the evolving freight industry. In its early stages, Freightliner exclusively manufactured for its parent company. However, in 1951, it entered into an agreement with White Motor Corporation (Ohio), whereby White would distribute Freightliner trucks through its network of dealerships spanning the nation.

The collaboration proved successful over the following 25 years, with sales conducted at White dealerships yielding profits for Freightliner. This arrangement enabled Freightliner to operate at a significant volume, thereby leveraging economies of scale. Lead by Jack Snead, CF continued their expansion into manufacturing. Transicold Corporation, specializing in railway components, and Techni-Glas Corporation, focused on glass-fiber products.

By 1959, sales had surged to $146 million, solidifying Consolidated's position as the largest common carrier in the United States. At that point, the company boasted an employee roster of nearly 11,000 individuals, managed a fleet of 13,800 units operating across 34 states and Canada, and had gained a reputation as one of the most proactive and dynamic firms in the transportation industry. Unfortunately, turbulence was ahead.

Restructuring and refocus

In 1960, a blend of economic recession and insufficient consolidation of Consolidated's diverse ventures culminated in a year-end loss of $2.7 million and the suspension of dividend disbursements. This prompted the request for Jack Snead's resignation. William G. White was appointed as his successor, assuming the roles of both president and chairman at Consolidated.

White discovered that the myriad acquisitions undertaken by Consolidated had been only minimally integrated, resulting in instances where multiple terminals, as many as five, were catering to a single city. Furthermore, several of the non-trucking enterprises were encountering lackluster performance.

Under White's stewardship, CF embarked on a series of restructurings and divestitures involving many of the company's subsidiaries. This strategic course of action aimed to realign the company's focus and streamline its management, as evidenced by the consolidation of resources.

These strategic initiatives yielded a remarkable financial turnaround, and by 1969, the company's revenue had surged to $451 million.

Deregulation

In 1980, the trucking industry underwent significant deregulation for the first time since 1935. CF recognized the potential for renewed rate conflicts and decided to fortify its position in trucking while relinquishing its manufacturing ventures. Consolidated effectively established four regional trucking entities focused on overnight delivery.

These Con-Way companies were generating sales of around $600 million in the early 1990s and appeared strongly positioned within regional markets. CF Motor Freight also excelled in its long-haul trucking segment.

In April 1989, CF pursued an acquisition that ultimately turned out to be underperforming. The company aimed to elevate its status in the air freight sector by acquiring Emery Air Freight Corporation, an industry leader with approximately $1.2 billion in revenue, much of it from overseas operations where CF AirFreight lacked strength. Consolidated paid $458 million for Emery, confident that it could reverse the downward trajectory after its own major takeover of Purolator Courier Corporation. However, Emery incurred losses of $100 million in the first half of 1990. CEO, Larry Scott, was replaced by Donald Moffitt.

Yet, the 1990s presented their share of challenges. The price wars stemming from deregulation persistently eroded profit margins, leading CF to operate with margins as slim as 1.5%. A Teamsters' strike in 1994 endured for 24 days and significantly impacted the company's yearly revenues. The practice of rate discounting took a heavy toll on CF's long-haul business, resulting in profitability being achieved only once between 1992 and 1996.

More restructuring

In 1996, the decision was made to spin off CF Motorfreight and four other long-haul subsidiaries, rebranding the group as Consolidated Freightways Corporation. The remaining entities, namely Con-way Transportation, Emery Worldwide, and Menlo Logistics, were renamed CNF Transportation. The rebranded CNF Transportation emerged from this restructuring with minimal debt, enabling it to refocus on its core expertise in LTL offerings.

Following the split, CNF and CF operated under distinct models. CNF predominantly operated as a non-union entity, while the legacy CF retained its union operations. The aftermath of the spin-off saw CNF flourish as an independent company, while CF began to encounter challenges.

Following the rebranding, the restructured Consolidated Freightways emerged with minimal debt, allowing it to redirect its attention towards its core strengths and expertise in LTL services.

In 1997, the company continued its drive for innovation by integrating a third-party logistics firm, Redwood Logistics, into its portfolio of companies.

Farewell

The company maintained its profitability until 1999, when unfavorable choices pertaining to customer relations and technological advancements led to a diminished profit of just $2.7 million, a significant decline from the previous year's earnings of $26.8 million.

Efforts at restructuring showed some improvement in 2000, but by 2001, the company encountered renewed challenges and disclosed a substantial loss of $104.3 million.

Despite its best efforts, the company struggled to reclaim its former standing. In 2002, Consolidated Freightways Corporation made the difficult decision to declare bankruptcy and cease operations. Meanwhile, the spin-off entity, CNF Transportation, rebranded as Con-way and continued its operations until 2015, at which point it was acquired by XPO Logistics.

Courtesy: Wiki, Pedia, FreightWaves