While the Yellow bankruptcy continues to make headlines, the rest of the transportation industry has its ongoing struggles. A much smaller company Twin Express quietly shut down in Rogers, MN. The public only found out about the closure of Twin Express when the fleet of 150+ tractors went up for auction. Logistics company Convoy suddenly closed, despite scaling back from 1500 to 500 employees, plus the backing of investors like Gates and Bezos. ACT Research forecasts that we might be nearing the “bottoming out” phase of the truckload cycle, but the industry hasn't followed familiar, predictable cycles since the pandemic.
In the past, a surplus of capacity (more trucks than freight) has quickly led to companies shutting down, reducing capacity across the industry. At a conference in August 2023, Werner CEO expressed his surprise that so many small and medium-sized carriers were surviving the high operating costs and lagging rates. Leftover savings and loans from the pandemic allow many smaller companies to operate at a loss, at least for a while.
The ACT Research forecast is cautiously optimistic but uncertain since nobody can see months into the future. Looking back at past decades, the picture is clearer in the rearview, and there’s more reason for optimism. Big companies have failed in the past, and 85 to 90 percent of new trucking companies fail in their first year. Nevertheless, many bankruptcies open new opportunities in the marketplace.
Right before the pandemic, 2019 was described as a “bloodbath” for the trucking industry. Celadon and New England Motor Freight (NEMF) were two of the biggest names going under. Celadon and its subsidiaries had over 2,500 drivers and nearly 1,300 office workers. A message on the ELD informed Celadon drivers of the company closure. NEMF was a unionized LTL carrier with 40 terminals and 3,745 employees. Falcon Transport closed in April of 2019, a month after the shutdown of a General Motors plant they served. Falcon Transport employed 585 drivers.
Altogether 1,000 trucking companies went out of business in 2019. For historical perspective, Business Insider put together a list of larger trucking bankruptcies since deregulation:
The big names don’t give the whole picture. Recessions strain the whole industry, with a record 3,065 bankruptcies in 2008 alone. Sudden collapses tend to be more chaotic, like how some drivers for Arrow Trucking and Celadon were stranded without working fuel cards.
As bad as things got in 2008, the COVID-19 shutdowns blindsided many companies. Revenue dropped overnight, and some receivers refused to accept shipments that were already in transit. From April to June of 2020, 1,580 companies went out of business. A total of 3,140 trucking companies ceased operations over the course of 2020. For those that made it through the first months, online shopping and other trends led to a surge in revenue. The chip shortage meant fewer new trucks competing for freight, and so rates continued to climb along with demand.
Another new wildcard came with COVID relief and stimulus. Checks allowed employers to delay or avoid layoffs, and consumers ordered more products online. Companies that would have otherwise gone bankrupt, like Yellow Corp, received massive infusions of cash. Yellow spent more than half of its $700 million Treasury loan on new tractors, trailers, and containers.
Within the trucking industry, the post-COVID boom lasted longer than previous cycles. New trucking companies rushed to pick up high-paying freight. In 2020, the FMCSA granted authority to 58,000 new carriers. When new trucks eventually rolled off assembly lines, they were in high demand. With rising fuel costs, experts warned truckers to brace for another 'apocalyptic' bankruptcy wave in 2021, but companies have been surprisingly resilient.
Rising capacity and expenses increased the pressure on trucking businesses. The peak of the pandemic trucking boom had definitely passed, but the closures in 2021 and 2022 were far from apocalyptic in scale. FreightWaves put together a list of trucking company bankruptcies in 2022. Smaller companies with less than 50 drivers included Rooney Trucking, Elite Transportation, McClellan Trucking and Duran Transfer, JCB Trucking Enterprises, Navarro Trucking Group, and Freon Logistics.
The broader trucking industry still has a lot of forward momentum, but significantly bigger companies have filed for bankruptcy in 2023. Yellow Corp had come close to bankruptcy previously, but it finally collapsed in 2023, the largest trucking industry bankruptcy in America. Many Yellow drivers have struggled to find new driving jobs.
Bankruptcy isn’t always the end of a company. Elmer Buchta Trucking used Chapter 11 bankruptcy to reorganize, and they went to the news and social media to emphasize that they weren’t closing or firing drivers.
For individual workers, mass layoffs can be just as impactful as a company closing its doors. Startup Convoy Inc. downsized from 1,500 to 500 employees before finally closing in October. Amazon laid off 18,000 employees between November 2022 and January of 2023, plus another 9,000 layoffs in March. Amazon Games cut 180 jobs and Amazon’s Alexa announced “several hundred” layoffs in November.
C.H. Robinson announced 950 layoffs between November 2022 and May 2023. Ryder System cut 800 jobs in Texas because of a plant closure. Flexport announced layoffs of 20% of their workforce, ending around 600 or 700 jobs. Embark Trucking laid off 70% of its staff (230 workers) before becoming a subsidiary of Applied Intuition Inc.. Uber Freight laid off 150 brokerage workers in January, then another 40+ in July.
The cycle may or may not have reached its “bottoming out” point, but there were a significant number of bankruptcies and layoffs in 2023.
At larger companies, with more than 100 employees, the Worker Adjustment and Retraining Notification Act (WARN) requires 60 days’ notice before mass layoffs or a company closing. Exceptions to the WARN Act include “faltering companies” seeking financing, unforeseeable circumstances, and businesses with less than 100 workers. Unexpected layoffs and closures are harder on workers, especially when final paychecks are interrupted.
When Sunset Logistics closed its doors, drivers reported that they were left without their final paychecks, without their $1,000 in escrow, and without transportation back to their home states. The owner of Sunset Logistics, Harvey N. “Buddy” Gainey III, comes from a family that’s well known in trucking and Michigan. His father, Harvey N. Gainey II, owned Gainey Corp., which filed for bankruptcy in 2008.
No doubt, bankruptcy and unemployment can be huge challenges for individual drivers and their families. No amount of historical perspective or Pollyannaism can really soften the blow of overdue bills. At To Exceed, we believe in professionalism and cost-effective service, not just because it’s the right way to do business, but because so many hard-working people have so much at stake.
“Trucking Industry Forecast for 2023” ACT Research. Nov. 03, 23
Buchs, Gary “How owner-operators can avoid joining the 'capacity reduction' ranks” Overdrive Online. Oct. 18, 2023
Chang, Brittany “The 10 largest and most unexpected trucking bankruptcies in recent history” Business Insider. Jan. 27, 2020
Fuller, Craig “Layoffs and bankruptcies pile up in logistics amid shocking downturn” FreightWaves. Nov. 17, 2023
Lockie, Alex “Werner CEO shocked by small fleets' resilience amid trucking's 'bloodbath'” Overdrive Online. Aug. 22, 2023
Pulley, Adriana “Trucking Company Twin Express Shuts Down” Freight Caviar. Oct. 18, 2023
Ronan, Dan “Trucking Bankruptcies Surged in 2020 as Pandemic Hit Small Carriers” Transport Topics. Feb. 16, 2021