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Major carrier's collapse expected to have minor impact

Less than a week after the collapse of Consolidated Freightways, the third largest less-than-truckload carrier in the nation, the impact on most larger shippers appeared minimal, although as many as 200,000 shipments were reportedly stranded in its trailers and terminals across the country.

Returning to work last Tuesday after the Labor Day holiday, most of the 73-year-old company's more than 15,000 employees found themselves locked out of offices, terminals and truck yards after Consolidated filed for Chapter 11 bankruptcy protection and suddenly ceased most of its U.S. operations as liquidation proceedings began.

The action was particularly worrisome in light of possible freight disruptions involving West Coast ports, as management and labor there engaged in protracted contract negotiations. Some progress was reported in those talks late last week. (See related story above.)

Consolidated Freightways reported revenues of $482.4 million for the most recent quarter with an operating loss of $53.9 million after write-offs. Its bankruptcy petition reported assets of $784 million against liabilities of $792 million.

Consolidated said one of its primary post-petition goals was to complete in-transit deliveries as quickly as possible. But those shipments are now under the control of the U.S. bankruptcy court and could require days or weeks to be released.

That might be problematic for some smaller shippers, among them retailers whose working capital is tied up in paid for, but unsold, goods. But major shippers, for the most part, seemed unfazed by the events.

That might be because of their size combined with their use of sophisticated logistics systems that commonly spread shipments across multiple carriers based on pricing and routing, in much the same manner as airlines plan their routes. Smaller shippers simply don't utilize such systems to the same extent, if at all.

The Home Depot relied on Consolidated for shipping as much as 5 percent of its goods to stores across the country, spokesman John Simley confirmed. The company began working with CF in late August to complete its shipments or find other carriers.

"We anticipated this and took preparatory action," Simley explained. "We don't have a lot of material out there that's still stranded. We had already made alternative arrangements, and our 12 other core carriers have picked up most of CF's shipments for us. There are still some goods that will have to be released by a bankruptcy court judge before we'll be able to move them."

Simley declined to disclose the value of the stranded goods or how many trailers were involved but indicated it was not significant.

Still other major retail shippers took action months ago to ameliorate the impact of a potential bankruptcy. Sears, for example, stopped using Consolidated as an authorized shipper in January when it determined the firm might run into problems.

"The only impact would be if any of our vendors had truckloads destined for Sears locations," said Sears spokeswoman Jan Drummond. "Then we might have to search for alternative ways to move those goods."

She said she was unaware of any such cases as of late last week.

While CF had been financially hemorrhaging for some time, a series of events touched off a domino effect that left the company inadequately capitalized, the firm stated.

"Last month, a surety bond that secured the company's workers' compensation and vehicular casualty insurance was cancelled, leading the company to believe that additional bonds would also be cancelled," a Consolidated statement read. "This negatively impacted pending discussions with all lenders and investors. Ultimately, the company was unable to secure financing and to bridge the surety bond gap."

While U.S. operations are being liquidated, its international businesses, including CFAirFreight, Canadian Freightways Ltd., and Grupo Consolidated Freightways S.A. de RL, continued to operate.

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