A brief history of trucking bankruptcies
The Celadon shutdown will be remembered as the largest truckload carrier bankruptcy in history – at least until the next one.
Indianapolis-based Celadon died of financial mismanagement. It was a one-off event. But many earlier transportation bankruptcies came in waves that followed structural changes in the industry.
After deregulation in 1980, for example, one unionized less-than-truckload carrier after another operated ramshackle fleets and ran up huge bills for duct tape until they coughed and wheezed their last. Bankruptcies, even fairly big ones, were almost a weekly event for the rest of the decade.
But Celadon got me thinking about an earlier wave of transportation bankruptcies that swelled as the interstate highway system opened in stages during the 1960s, slowly undercutting railroad domination of long-distance freight. Wherever an interstate highway opened, railroads lost business. Those bankruptcies were spectacular indeed because they were legendary railroads, not trucking companies.
But one memorable bankruptcy was a kind of hybrid. It was a national package carrier called REA, or Railway Express Agency. They picked up and delivered packages with trucks that were a common sight everywhere. New York City-based REA linehaul was by rail, usually on marked REA cars that moved on frequent, reliable passenger trains – until the interstates served up a double-whammy.
First, the new highways helped competitors like UPS move packages quickly from city to city on trailers. Second, they forced railroads to cut service – especially passenger service, slowing REA in the process. By the mid-1970s, the interstate system was pretty much complete, and REA was in financial hospice. U.S. Postal Service parcel post and UPS owned the package delivery space by then, so when REA finally keeled over and died in November 1975, nobody noticed.
OK, so it wasn’t exactly a blockbuster bankruptcy, but the following year, 1976, there was a much noisier one – the death of an LTL carrier named Associated Transport.
AT, as it was sometimes called, was a biggie. Maybe even the biggest. AT itself claimed to be the biggest tucking company in the country and – when they were all lathered up – in the entire world. They certainly had a lot of trucks and terminals, but not as much geography as you might think.
From New York State and Massachusetts in the north, AT service extended south to South Carolina and west to St. Louis. In the company’s heyday from the late 1940s through the early 1960s, that was where most of the people and industry were. There was no Major League Baseball team west of the Mississippi until 1958.
According to lore, AT resulted from the merger of seven carriers with big ambitions – so big that in the mid-1950s they moved their headquarters into a brand-new New York City skyscraper at 380 Madison Ave. I was there once. A trucking company among all the advertising agencies, media companies, and big national law firms? It felt odd. It was during AT’s last days, when they were in a downward spiral. I could feel desperation and resignation in the air.
AT would stay on Madison Avenue for almost 20 years.
During that time, though, rival carriers were growing faster than AT was. AT’s heavy presence in the New York metro area withered as manufacturing and other heavy industries began to bleed away in the 1960s. By 1970, it was a hemorrhage. What had been a net outbound freight area was well on its way to becoming the overwhelmingly inbound area it is now. That wasn’t bad for the big carriers from the West then growing eastward. It was very bad for AT.
Again, according to lore, AT operated a dense network of terminals that meant good relations with local shippers but lousy transit times. Whatever the reasons, AT was tottering in the early 1970s, and everyone in the business knew it.
That’s when a burgeoning upstart New Jersey carrier called Eastern Freightways tried to swallow the once mighty Associated Transport. The gutsy effort would come to validate the phrase, “be careful what you wish for.”
In 1974, Eastern gained control of AT, but in the deep recession at the time, they were unable to turn the carrier around. Their bold gamble turned into a disaster. In April 1976, Associated Transport and Eastern Freightways filed for bankruptcy and sank beneath the waves of commerce. The logistics (it was called “traffic” then, not logistics) community had seen it coming, so most shippers were spared problems. The serious consequences were reserved for the more than 7,000, now unemployed workers of the combined companies.
There’s more to the AT story. Eastern Freightways owner Daniel Shevell, who with his brother Myron had been deeply involved at the failed grasp for commercial glory, took his own life. With this sad, dramatic element the collapse of Associated became particularly memorable – at least for those of us in the business at the time.
Myron Shevell went on to buy and grow an LTL carrier named New England Motor Freight. NEMF, as it was known, would become the 19th largest LTL in the country. Then this past February, in one of the strongest trucking markets in years, Elizabeth, N.J.-based NEMF failed. Like Eastern and Associated before it, NEMF curled up and died.
So, 2019 that began with one of the largest LTL bankruptcies in a decade ends with the Celadon bankruptcy, the largest ever in the truckload sector. LL