Indiana trucking company bankruptcy the tip of the iceberg for strained industry
Indiana-based trucking company Celadon Group, which filed for bankruptcy Monday, is the latest in a string of company closings that have made 2019 a particularly painful year for the industry.
While Celadon Group, which shut down all operations as of Monday, was weighed down by costs related to an alleged fraud scheme among former executives, other companies in the industry have been faced with a variety of economic challenges that have led to hundreds of closings.
Trucking companies are failing at a fast rate in 2019. The pace at which companies are failing is about double the pace of 2018. In the first half of the year alone, 640 trucking companies had failed and more than 20,000 trucks had been pulled from the road.
In 2018, 310 companies failed.
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Among the big companies that failed in 2019 is New England Motor Freight, which employed more than 1,400 drivers. HVH Transportation, Falcon Transport and LME have all shuttered operations this year, too.
Part of the problem, according to Donald Broughton, principal and managing partner of data firm Broughton Capital, is that spot pricing has dropped, which is hurtful to smaller companies that operate in the spot market instead of the contract market. Spot prices refer to shipping prices as they currently exist.
Trade tariffs, as well as slowdowns in a variety of markets, including housing and auto, contributed to the drop, Broughton had told FOX Business. He predicted companies would continue to fail into 2020 because of the weak pricing environment.
Additional pain for the industry could be coming next year in the form of labor laws designed to protect contracted workers from being misclassified. In California, for example, starting in January a law will go into effect that will make it harder for companies to classify workers as contractors, which the California Trucking Association has said could put 70,000 owner-operators in the state out of work. The group has sued to prevent the law from taking effect.
New Jersey is considering similar presumption-of-employment status legislation, which has caused alarm among the state’s trucking industry, as well.
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Celadon Group was the largest provider of international truckload services in North America. It paid $42.2 million earlier this year to settle allegations that it misreported profits and assets. The company has around 4,000 employees.
In a press release, the company’s CEO cited the costs associated with the multi-year investigation, in addition to “enormous challenges in the industry,” as reasons for filing for Chapter 11 protection.