Consolidated Freightways Corp. (CF) told employees in various telephone communications yesterday that it would discontinue operations effective immediately. In order to assure the orderly liquidation of the business, the 73-year old freight transportation company and nation's third largest less-than-truckload carrier filed for Chapter 11 bankruptcy today.
Vancouver, WA-based CF said it will lay off about 15,500 workers, with 80% of those happening immediately. Operations of the company's CF AirFreight and Canadian Freightways Ltd. subsidiaries are continuing normally, and their employees will not be terminated as a result of this action.
Management employees of CF's U.S. operations were briefed in a conference call yesterday. Supervisory personnel received calls from their managers shortly thereafter. All drivers and freight terminal employees received instructions at their homes to call a toll-free number, where they heard a recorded message from John Brincko, CEO of the company, telling them not to report to work Tuesday.
In letters to be mailed to each employee today, president & CEO John Brincko said the company had "been vigorously exploring ways to restore the financial health of the company.
"We expected that recent discussions with our banks, other lenders and real estate investors would enable us to obtain significant additional financial resources and that, together with the combined efforts of employees, we would be successful in our restructuring efforts.
"Unfortunately, this has not been the case. Nor do we have the current resources necessary to sustain the business without additional financial resources. Therefore, it is with sadness and regret that I must inform you that Consolidated Freightways has discontinued operations effective immediately and all CF terminals are closed."
In his remarks to employees, Brincko said that, despite the severe restrictions imposed on the credit, insurance and real estate markets since the events of September 11, "and in my very short three months here, I was hopeful that, with the right moves at all the right times, we could be successful in turning the company around."
Brincko said that until very recently, the company was hopeful it could secure additional financing. However, he said that when one of the company's surety bondholders cancelled coverage related to the company's self-insurance programs for worker's compensation and vehicular casualty, it negatively impacted discussions with all lenders and investors.
Ultimately the company was unable to secure financing and to bridge the surety bond gap, at which point the situation became critical. Additionally, the company anticipated that a second insurer would also cancel coverage.
"Without the availability of further financing, the Board of Directors reluctantly concluded that the company simply could not continue to operate, pay employees and meet its obligations," Brincko said.
Nasdaq last week added an "E" on the end of CF's ticker symbol and warned that the company could be delisted because it hasn't filed its second-quarter financial report. The "E" is reserved for companies whose filings with the U.S. Securities and Exchange Commission are delinquent.
CF missed two deadlines for filing the report, the latest on Monday, and company spokesman Mike Brown had said Brincko and CFO Steve Sokol, who had also recently joined the company, had not had time to finish the financial report for the quarter ended June 30.
CF has been treading rough financial waters. It posted a net loss of $36.5 million on first quarter revenue of $463 million as it lost business over what it called "growing competitive pricing pressure." It lost $104.3 million in 2001, including a $37.5 million fourth-quarter loss.
The carrier had been treading rough financial waters. It posted a net loss of $36.5 million on first quarter revenue of $463 million as it lost business over what it called "growing competitive pricing pressure." It lost $104.3 million in 2001, including a $37.5 million fourth-quarter loss.
Brincko, a business turnaround specialist, was brought in to replace Pat Blake as CEO. CF's board said then that its restructuring had reached the point at which it needed an experienced turnaround professional to carry the process forward to successful completion.
Brincko's turnarounds include Sun World International Inc., Barney's New York, Mossimo Inc., Globe Security and Stroud's.
