Venerable Alvan Motor Freight Closes in Midwest. Who Benefits and Who's Next?

Implications:   After 67 years of service, Michigan-based Alvan Motor Freight is ceasing operations and will file for Chapter 11 bankruptcy protection.    A Teamsters-covered carrier, Alvan is the latest victim of the brutal operating and cost environment facing all U.S. trucking companies. Alvan President and CEO James Van Zoeren called it "the worst day of my business career."   The principal beneficiary could be YRC Worldwide unit Holland, another Michigan-based carrier and the largest unit of YRC Regional. Con-way Central, a unit of Con-way Inc., also figures to be a winner in this fallout.

Analysis:   There's no cheering today in Kalamazoo, Mich. Venerable Alvan Motor Freight, a Teamster-covered carrier based in Kalamazoo, is ceasing operations after a 67-year run.
  Alvan President and CEO James Van Zoeren said it all when it called it "the worst day of my business career."
  Alvan was victimized by the brutal operating environment facing all U.S. motor carriers, and a few problems specific to Alvan. Among the general problems:
  1. The more than 200 percent run-up in diesel fuel prices in the past four years with diesel currently topping $4.80 a gallon.
  2. The depressed U.S. manufacturing economy, specifically housing and autos, which is hurting all truckers.
  3. Overcapacity in the trucking industry, despite significant closings and reduction in capacity by existing carriers.
  4. Rates which are not commensurate with costs in light of $140-a-barrel crude oil.
  Now, the specific Alvan problems:
  1. Based in the Midwest, Alvan is exposed to what arguably is the most depressed manufacturing sector in the country.
  2. It was hurt by an 87-day strike at American Axle, one of its major customers.
  3. The resultant "trickle-down" effect that affected U.S. automobile manufacturing.
  One of the last remaining family owned carriers (along with New England Motor Freight and a  few others), Alvan "was quickly becoming a dinosaur," according to the company press release announcing its Chapter 11 bankruptcy proceeding.
  At $77 million annual revenue, Alvan was in the difficult "in-between" size. It was not  large enough to compete with the likes of $10 billion YRC Worldwide or even $5.1 billion Con-way Inc. Yet, it also was probably too large to be a takeover candidate by one of those mega-carriers.
  Also, being unionized did not help Alvan. Even though the company posted a healthy-enough operating ratio of 93.42 as recently as 2000 on $75.6 million in revenue, it had not grown in recent years. Combined with the run-up in diesel -- which is now threatening to overtake labor as most truckers' largest cost -- it was a recipe for bankruptcy.
  Alvan employed 525 people with terminals through the upper Midwest including outside Detroit, Chicago, Indianapolis, Columbus and Cleveland, among other locations.
  I personally knew several Alvan executives and always found them to be first-class people and businessmen.  The problems with Alvan had little to do with their expertise; simply the operating environment for mid-sized carriers today is too brutal for many to survive.
  As CEO Van Zoeren put it, "A number of problems outside our control have overwhelmed us to the point where we were left with little choice."
  As I wrote when Jevic Transportation closed in May, this will not be the last casualty. Nor, unfortunately, will Alvan be the last. Who's next?