Celadon Files for Bankruptcy and Shocks the Industry
Indianapolis-based trucking firm Celadon filed for Chapter 11 Bankruptcy according to court documents on December 9th, 2019. The move, which came as a mild shock to the logistics industry, allows the company to restructure its financial holdings and reorganize operations. However, it also left nearly 3,000 active drivers without guaranteed jobs – all just weeks before the Christmas holiday.
The bankruptcy filing is expected to be the largest in the history of the truckload-industry and brings into question whether this is a signal of upcoming financial stress and hardship for other US-based carriers.
In today’s blog, we’ll look at what we know about Celadon’s bankruptcy, how it impacts employees, and how it may cause delays in freight movement into both Mexico and the US.
Facts About the Bankruptcy
The 2019 calendar year has been a tough one for trucking companies and their employees. In fact, as of July 2019, 640 trucking companies have filed for US federal bankruptcy protection of some sort.
In comparison, 2018 saw less than 200 bankruptcies in the same six-month cycle. According to research completed by ACT, the $800 billion trucking industry entered a slight recession in the first quarter of 2019.
This, along with growing concerns over cross-border tariffs, concerns on USCMA approval, and a lack of qualified drivers, have impacted capacity and caused many shippers to look for different movement options.
For Celadon, their financial struggles also stem from a recent filing by the Securities and Exchange Commission which charged two former Celadon execs during a multiple-year accounting scandal.
This news sent shockwaves through the trucking industry, but most importantly, plunged their stock value to an astonishing $0.41 per share – compared to their $20 per share price in 2015. Eventually, the stock hit rock bottom on Tuesday, December 10th – capping out at just $0.02 per share.
The filing stimulated CEO Paul Svindland to state in a public release, “We have diligently explored all possible options to restructure Celadon and keep business operations ongoing. However, a number of legacy and market headwinds made this impossible to achieve.”
But what about the people that make up this trucking company? It was widely reported that nearly 3,000 truck drivers that were on the road this week were stranded – as financial accounts were frozen, leaving the cost of fuel, hotels, food, and other essentials as the sole responsibilities of the drivers.
However, these reports were shown to be slightly inaccurate.
A fleetwide message was sent to all drivers that stated:
“We regret to inform everyone that Celadon Group Inc. has filed for a Chapter 11 bankruptcy. We will continue to haul and deliver all loads that we now have in transit. We will have more information in the morning as to where equipment needs to be returned.
We have been assured that everyone who follows instructions will be paid for the work and miles assigned and completed, and Celadon will not leave anyone stranded away from home.
Finally, we truly appreciate your commitment and dedication to this company and wish you all luck moving forward.”
The message was sent on December 9th, 2019 and confirmed that all loads that were in transit would be delivered as committed. However, it was also reported that Celadon is looking to provide $3.9 million in wages that have been unpaid and an additional $1 million in employee termination bonuses. This equates to $267 per employee.
What Impact will this Have on Cross Border Shipping?
Celadon is a major carrier that moves freight from US shippers into Mexico. With more than 2,500 in-house power units and subcontracting more than 350 owners/operators that serve cross border shipping, a large share of daily freight operators have now been shut down.
This begs the question – who is available to pick up the slack?
The recent news out of Washington DC, that the US congress has agreed in principle with a revision to the USCMA and is planning on voting the trade agreement into ratification, might signal a rapid need for even more freight movements in and out of Mexico before the New Year.
Currently, there is no word on if or when Celadon’s fleet of cross-border power-units will return to operation. However, if there is a silver lining, many of these CDL drivers may find employment with other carriers, looking to pick up volume due to Caledon’s restructuring, sooner than later.