CF Bankruptcy: Labor Day

Consolidated Freightways files for Chapter 11 bankruptcy protection on Labor Day. Coincidence? I don’t think so. Can part of the reason for the demise of this once great carrier be laid at organized labor’s door?

I remember meeting with two highly-placed CF executives six years ago. They were making the rounds, explaining to the press why they were spinning off the union long-haul LTL portion of the business. Roadway Corporation had just broken up, spinning off Roadway Express and keeping the non-union portions of its business. The two CF emissaries said that, like Roadway, they had looked down the road and determined that many issues with CF’s union operation would call into question the company’s survival. They had to spin it off. CF, they said, would have a better shot going it alone.

How ironic that union Consolidated Freightways had entered the non-union regional carrier market to stave off stiff competition from non-union competitors, and eventually came to believe that business model was more viable than its own.

So Consolidated Freightways was spun off and six years later shuts down. What caused CF’s failure? Several recent events created a domino effect leading to bankruptcy, according to the company. The death knell came in August, when a surety bond securing workman’s compensation and vehicle casualty insurance was cancelled, blocking any last-minute financial stay of execution from other lenders and investors. But mile-markers on that six-year road were many—predation by non-union competition, the soft economic climate, the meltdown followed by Enronism creating skittishness in the financial markets, management mistakes, and, some would make the case, the union carrier business model.

I caught flak for saying this before. But if labor management does not want a chilling effect to roll over the remaining union shops, it better continue working hard with carrier management to find new, creative ways to work together. Rank and file workers who take it on the chin when these types of failures occur should also encourage continuing cooperation in tough times like these.

And so Inbound Logistics’ trucking issue arrives without one of the mainstays on the Top 100 list. After running hard for more than 70 years, with 18,000-plus employees, 300 terminals, and a couple of billion dollars a year in sales, CF has shut down, liquidating all assets with freight left in the pipeline and stockholders left holding an empty bag. About 3,000 workers will stay on to deliver the freight and handle the bankruptcy proceedings.

The immediate problems this bankruptcy caused for shippers will be sorted out in the days and weeks ahead. Long term, the economy and financial markets will eventually come back, and the environment that helped set the stage for CF’s failure will go away. But there are larger issues here that will be sorted out by labor and management at other carriers. And, if that is not to be, those issues ultimately will be resolved by the marketplace.