XPO leaning toward keeping former Con-way's truckload assets, Jacobs says
Integrating truckload business may make more sense than selling it, XPO chief says.
The head of transport and logistics firm XPO Logistics Inc. said today the company is leaning toward keeping the truckload assets of the former transport and logistics giant Con-way Inc., saying the operation will deepen XPO's exposure in the U.S.-Mexico cross-border market and give it the means to keep valuable truckload capacity in the market.
Speaking at the SMC3 annual winter meeting in Atlanta, Bradley S. Jacobs said there hasn't been a decision on whether the former Con-way Truckload should be sold or the assets should be retained and integrated into XPO's network. The truckload operation was not considered a strategic asset for XPO, as the logistics firm was mostly interested in Con-way's less-than-truckload (LTL) operation, Con-way Freight, and its profitable contract logistics business, Menlo Worldwide Logistics, when XPO acquired Con-way last September for $3 billion in the largest transaction in U.S. trucking history.
Con-way had acquired the truckload operation in 2007 when it was known as Contract Freighters Inc. The $750 million purchase price was considered wildly inflated, and the overvaluation problem was compounded by the unit's operational struggles since then.
In October, Jacobs said XPO had received three unsolicited offers from unnamed prospective buyers for the truckload operation. He didn't rule any of them out at the time.
In remarks during a give-and-take with an audience of more than 500 people, Jacobs said a slowdown in the industrial sector of the U.S. economy is burdening many shippers in the space. Those businesses are focused more than they've been in several years on reducing costs, Jacobs said. XPO's objective is to deliver integrated solutions across its wide portfolio to help customers drive down costs while providing the services they need, he said.
Meanwhile, XPO will work to shave its own costs, especially in the asset-intensive side of the business, according to Jacobs. For example, about one-third of the former Con-way's volumes were transported by third parties, with the other two-thirds moving on Con-way vehicles, he said. Those third-party contracts have not gone out for bid since 2009, Jacobs said, hinting that it was time to rebid that business.
Jacobs said he attended the SMC3 conference to meet with top third-party logistics (3PL) executives in an effort to attract and retain their business. Jacobs acknowledged that he was reaching out to firms that compete with XPO, but said that the company was comfortable in working with rivals if they can develop and execute mutually beneficial solutions.
Jacobs said he has met with CEOs of five of the top seven 3PLs, including one at the SMC3 meeting. He wouldn't identify the executives or the companies.
Currently, XPO's customer base is composed of large shippers who tender large volumes at modest margins, and small to midsize shippers who are more profitable for XPO. As for 3PLs, Jacobs said XPO and its counterparts are engaged in a who-blinks-first contest of sorts. "We are like two dogs looking at each other trying to size each other up," he said. The goal, he added, is to convince other 3PLs that "we're a friendly dog, not a mean dog."
About the Author
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
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