Trucking Market Will Absorb Celadon Shutdown, Transport Experts Say
December 10 2019 - 5:59AM
Dow Jones News
By Jennifer Smith
Trucking markets should easily absorb the sector's biggest
bankruptcy in years, freight industry experts say, as truckload
carrier Celadon Group Inc. winds down operations and customers seek
to recover their shipments.
The Indianapolis-based trucking company sought chapter 11
bankruptcy protection Monday and asked its drivers to deliver loads
still in transit and hand over the company's trucks.
Celadon is one of the largest truckload carriers in North
America, with some 3,300 trucks and 3,800 workers, including 2,500
truck drivers. It had an estimated $611 million in revenue so far
this year, according to transportation research company SJ
Consulting Group Inc.
Celadon's customer list included Lowe's Cos., Philip Morris
International Inc., Walmart Inc., Honda Motor Co. and Procter &
Gamble Co., according to its bankruptcy court filing.
The company owes $33 million to the Justice Department stemming
from a federal probe into the company's accounting, and smaller
amounts to creditors including TA Dispatch LLC, which bought some
of the company's logistics assets earlier this year, and vendors
such as Pilot Travel Centers LLC and Goodyear Tire & Rubber
Co.
Although the shutdown is the biggest truckload bankruptcy in
memory, Celadon's business only accounts for a sliver of the
roughly $200 billion for-hire truckload market, SJ Consulting
President Satish Jindel said.
"There are plenty of carriers who can fill up the demand this
will create," Mr. Jindel said.
Capacity in the broader truckload market remains relatively
loose this year after truckers rushed to expand their fleets during
the 2018 freight boom.
"It doesn't move the needle on capacity because there are more
trucks than loads in the general market," said Donald Broughton,
managing partner of transportation industry data firm Broughton
Capital LLC.
Such shutdowns raise concerns over drivers who may be stuck far
from home and for shipping customers who may have freight shipments
tied up. Some previous trucking failures by smaller companies have
left drivers and cargo stranded.
Celadon driver Sam Jaime said Monday that company officials told
truckers hauling loads to finish the delivery, while others were
directed to the closest Celadon terminal or to the nearest truck
stop. "Celadon is offering a bus ticket home," he said. "It is on
us to see how to get our stuff home."
Celadon officials didn't respond to requests for comment.
Given Celadon's size, the company likely had "thousands of loads
in transit, and then additional loads awaiting pickup at shippers"
facilities at the time of the shutdown, said Larry Gross, president
of Gross Transportation Consulting.
He said shippers might see "some very short-term dislocations
while all of this gets sorted out," but Celadon "seems to be
approaching it in a responsible manner."
Celadon also handles cross-border freight running between Mexico
and the U.S. The shutdown could make it harder for shippers to find
northbound capacity, Mr. Gross said, and potentially boost
intermodal business moving freight by truck and rail across the
border for operators like Kansas City Southern.
Messrs. Gross and Jindel both attributed Celadon's failure to
the company's individual problems, which included an accounting
scandal tied to a big bet on the company's truck-leasing business,
and not to a broader slowdown this year in freight demand.
"It is more about Celadon than it is about any current
apocalyptic events in the trucking freight market," Mr. Gross said.
"Having said that, when the tide goes out it exposes the rocks.
They came under pressure because of the supply-demand
imbalance...and ran out of runway."
Write to Jennifer Smith at jennifer.smith@wsj.com
(END) Dow Jones Newswires
December 10, 2019 05:44 ET (10:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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