Third largest trucking company shuts down

Security personnel guard the Church Road location of Consolidated Freightways in Manchester Township, Pennsylvania, Monday, as two large tractor-trailers block the gate from truck traffic.

VANCOUVER, Washington (CNN) -- Consolidated Freightways, the nation's third-largest long-haul trucking company, plans to file for Chapter 11 bankruptcy Tuesday, its chief executive announced in a recorded message to the company's 20,000 employees Monday.

"All U.S. terminals will not be open tomorrow morning and you should not report, since your employment ends immediately," said CEO John Brincko in a 6.5-minute message. "I am sorry for this action but we have no other choice due to a lack of financial resources."

"I know there is nothing I can say to make this easier for any of you. There are no words that can express my disappointment at what has happened," Brincko said.

Brincko cited the difficult economic climate, especially since September 11, in making the decision.

"This is a very sad turn of events for all of us, but try as we did, we simply could find no other viable option," Brincko said. "We have been vigorously exploring ways to restore the financial health of the company for some time now."

Teamsters spokesman Brett Caldwell said Consolidated informed the union it would lay off all of its employees, which includes 14,500 Teamsters.

The company last month delayed reporting its second-quarter financial results -- which under new rules had to be certified by the company's officers. Analysts expected it to report its seventh consecutive quarterly loss.

Consolidated has had more financial trouble in recent years than its two larger competitors, Yellow and Roadway.

The segment of the trucking industry these companies serve is known as less-than-truckload, or LTL, which means they handle pallet-sized shipments of freight from numerous customers in the same truck.

Craig Evans, left, with 30 years on the job, Arthur Tabler, center, with 26.5 years, and Louis Tomososki, with 33 years on the job, stand in front of the trucking company's main yard in Portland, Oregon, Labor Day.

The network of terminals needed to sort the freight makes the segment far less open to new entries than the truckload segment, which handles trailer-size shipments directly from point of origin to destination.

Several major LTL carriers have declared bankruptcy in recent years, such as Preston Trucking, Nationsway Trucking, and ANR/Advance.

As recently as the mid-1990s, the growth of non-union regional LTL carriers was encroaching on the unionized, long-haul LTL carriers such as Consolidated and Roadway, as the sector saw pricing wars despite a growing economy.

Caldwell said that while the bankruptcy move was not unexpected, it came sooner than union analysts had predicted.

"Our freight division talked to the company as far back as a year ago when we saw some real issues with the company that we thought would have an impact on their financial well-being," Caldwell said.

Consolidated requested a vote on wage concessions, which was then scheduled for this week, but the company abruptly canceled the vote two weeks ago.

"It's now clear that the wage concession would not give them enough cash to continue for any time frame," Caldwell said.

When Consolidated brought in Brincko as CEO in May, the move brought a fresh attitude to the talks between company and union officials, Caldwell said, but his arrival came too late to save the company.

"It's extraordinarily depressing," Caldwell said, noting the announcement came on Labor Day.

"There are nearly 15,000 Teamsters workers who, rather than celebrating the day, will have to determine what the next step in their lives will be."

A locked gate at the Consolidated Freightways Corporation yard in Portland, Oregon.

Kevin Chapin, a union steward at a shipping terminal in Portland, Oregon, was assuring workers they would soon receive paychecks and information.

"Any monies owed, any vacation time, any sick time -- we're going to be receiving a letter in the mail stating when we'll be paid, when to come and get your personal stuff out of here," Chapin announced. "But as of right now, we're done. CF is closed."

Brincko said the company held intensified discussions in recent months with banks, other lenders and real estate investors as it sought to keep the company afloat.

The situation became "critical" over the past few weeks, he said, when one of Consolidated's surety bond holders canceled coverage related to workers' compensation and vehicle casualty and liability.

"With this cancellation, we expected others to follow," Brincko said. "We immediately went to our lenders and other institutions in an effort to bridge the gap, but found we were unable to get the funds we needed."

Consolidated has 350 terminals and more than 30,000 vehicles in its fleet. It serves almost every market in the United States, Canada and Mexico. It also offers trucking to Alaska, Hawaii, Puerto Rico and the Caribbean.

Analysts have expressed concern about the trucking industry recently, with little expectation it would show much gains.

"It is still too early to own ground transportation names," said Ed Wolfe, an analyst with Bear Stearns, in July. He said he expected to see additional slowing in the trucking sector before the economy begins to turn around.

Employees of Consolidated Freightways talk on cell phones and to each other in the parking lot outside of their offices in Vancouver, Washington, Monday.

"We've been somewhat concerned with transportation companies, trucking, mainly because of the fact that we're not in a very strong economic recovery," Michael Carty, a stock market strategist at New Millennium Advisors, told CNNfn last month.

"In addition to which, if we do have an incursion into Iraq, it's likely to influence oil prices substantially. And fuel is a very important part of trucking's cost -- the trucking industry's cost. So we've been avoiding it for the moment," Carty said.