The demise of trucking company Celadon Group is another leg in what's proving to be a dismal drive for the industry this year.
The largest ever trucking sector bankruptcy, Celadon abruptly shut down — leaving more thanand in many cases stranded with their rigs — amid an accounting scandal that prosecutors say cost shareholders $60 million. But the company's collapse also reflects an industrywide downturn that has taken out hundreds of other trucking companies this year.
In the first three quarters of 2019, nearly 800 carriers went out of business, more than double the count of trucking failures in 2018, according to transportation industry data firm Broughton Capital.
"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," Cassandra Gaines, a transportation attorney and head of Gaines Law Group, told CBS MoneyWatch, adding that it has been a "tough year" for the industry.
A number of factors are behind the pileup, including escalating insurance costs, tariffs impacting the ability to get cheaper products from China, and a decline in the spot market where shippers book last-minute transportation.
That 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," Gaines said.
Drivers "stuck all around the country"
One of the largest truckload carriers in North America, Celadon had a fleet of roughly 3,300 tractors and 10,000 trailers. Its sudden closure left about 4,000 people without jobs and many truck drivers stranded mid-route.
"So every company driver and owner operator lost our jobs today without being notified about the closing of the doors of this mega company," one driver, Roderick Orr, posted this week on Facebook. "A lot of people I know are stuck all around the country trying to get home and look for another job."
Meanwhile, the slump also has even bigger players hitting the skids, according to Donald Broughton, founder of the analytics firm bearing his name. In 2018, 310 trucking companies with an average fleet size of nine trucks failed, pulling 2,800 trucks off the road. The 795 companies that pulled the plug in the first three quarters of 2019 averaged 30 trucks, with nearly 24,000 trucks pulled off U.S. roadways, Broughton said.
Shipping rates were strong last year, buoyed by healthy demand and trucking capacity tightened in part by new rules requiring truckers to keep electronic logs of required breaks. Such technology has made trucking more efficient, in Broughton's view.
This year, higher tariffs on imports from China and other countries have resulted in softer demand for goods from a host of industries. That has pushed down shipping rates, denting trucking company revenue.
The nation has been contending with a major shortage of truckers for several years, with a gap of more than 60,000 driver openings at the end of 2018, according to the American Trucking Associations. That's good news for drivers freshly laid-off by Celadon, with one competitor offering jobs and even help getting home.
"We are committed to matching or exceeding your existing pay package for a like job or route and many of our open jobs come with a generous sign-on bonus as well," Dave Ables, chief executive of Dart Transit, stated in an open letter to Celadon drivers. "Whether you are able to work for us or not is secondary to the primary goal of getting you off the road and to your desired location as quickly and safely as possible."