Troubled transportation and logistics provider Roadrunner Transportation Systems Inc. said today it will downsize its unprofitable dry van business line by year-end 2019, reducing the company's dry van tractor and trailer fleets by over 50% and laying off some 10% of the company's total workforce.
The reduction to the business unit, which is part of the company's truckload segment, will include closing five terminal locations and eliminating approximately 450 jobs, according to Downers Grove, Illinois-based Roadrunner.
Slashing its truckload business is the latest maneuver Roadrunner has made to regain control after a series of financial and management mishaps, highlighted by its move in 2018 to re-state its 2016 earnings, revealing that it had lost $360 million on revenue of $2.03 billion.
Shortly after that fiscal wreck, Roadrunner ran into a technology pothole, revealing that hackers had compromised an employee's email account in November of 2018. Third party forensic investigators found that data including names, Social Security numbers, financial account information, and driver's license numbers for some 78 individuals may have been exposed, although the company says it has found no evidence that any information has been subject to misuse.
The latest stumble comes amid one of the most turbulent times to strike the freight sector in a decade. A recent study by Maine Pointe and Michigan State University found evidence of "carrier and shipper imbalances across corporate North America's transportation network," triggered by causes such as unpredictable economic growth, a shortage of truck drivers, increases in environmental restrictions, and reduced capacity.
That volatility forced trucking rates up to historic highs in 2018, pushing many fleets to increase driver wages and replace vehicles and technology, according to a panel of carrier CEOs who spoke at the annual CSCMP Edge conference in Anaheim, California, last month. However, that reaction added a wave of excess capacity to the system that soon led to a sharp drop in spot market rates, forcing the bankruptcies of dozens of fleets, the panel said.
Roadrunner is now positioning itself to survive these conditions by taking the stringent step of shrinking its truckload fleet. "The decision to downsize the dry van business is a significant step in executing our strategy to emphasize our value-added logistics and asset-light [less than truckload (LTL)] segments and increase our returns on invested capital," Roadrunner CEO Curt Stoelting said in a release.
"We factored in the impact of this downsizing as part of the strategic review of our truckload segment. We believe downsizing the dry van business will improve operating margins and cash flow, reduce lease obligations and debt, improve internal controls and allow greater focus on the significant value-creation opportunities within our other businesses," Stoelting said.