Trucking news: Con-way announces CFI is now officially Con-way Truckload

Jeff Berman, Senior Editor -- Logistics Management, 1/10/2008

SAN MATEO, Calif. and JOPLIN, Mo.—Nearly five months after Con-way completed its $750 million acquisition of truckload carrier Contract Freighters Inc. (CFI), it announced today that CFI has been officially renamed as Con-way Truckload.

Con-way said in a statement that the new Con-way Truckload is comprised of more than 2,800 tractors, 8,000 trailers, and 3,500 employees. And it added that the unit is expected to generate $500 million in annual revenues. Con-way said this addition to its service line—coupled with Con-way Freight, the company’s less-than-truckload unit, and its global third-party logistics unit, Menlo Worldwide—equips the company with transportation and logistics services, ranging from first-mile sourcing in Asia or Europe to last-mile delivery in North America.

When the acquisition was first announced in July 2007, LM reported that Con-way President and CEO Douglas W. Stotlar said the impetus for the deal originated from in the wake of the boom in West Coast imports, when Con-way found it lacked the capacity to handle shipments out of the Ports of Long Beach and Los Angeles.

And since the deal was made official on August 23, 2007, the integration of CFI into the Con-way fold has gone smoothly and things are moving along as expected, according to Con-way Truckload President Herb Schmidt, former president of CFI.

“We had a long track record with Con-way prior to the acquisition, and I think that is one of the things that made us so attractive to Con-way and made them attractive to us,” Schmidt told LM in an interview earlier today. “We worked together for nine years, and they knew our people, and we knew their people.”

Schmidt described CFI’s transition process into Con-way Truckload as relatively uneventful, nothing that there have been adjustments along the way, but these adjustments are nothing that was not previously anticipated.

Shipper feedback: Because Con-way and CFI already share several mutual customers, CFI’s original 2,800 customer base already does—or has done—business with Con-way at different points in time, said Schmidt. The majority of these Con-way customers came from its LTL business, because Con-way’s truckload business did not have many customers outside of its internal Con-way network, according to Schmidt.

Having mutual customer helped ease the transition from CFI to Con-way, noted Schmidt, because operations progressed as business as usual.

“For the most part, the [shipper feedback] we have received, indicates that this deal makes a lot of sense,” said Schmidt. “The positive response has outweighed any negative response ten-fold.”

CFI still has the same number of customers it had prior to the acquisition, because Con-way was a customer, said Schmidt. And an interesting takeaway of this transaction is that CFI does not do business with 80 percent of Con-way’s current national accounts. Schmidt observed that this may present the new Con-way Truckload with a lot of opportunities to make introductions and become a truckload carrier for several Con-way customers that only currently have LTL relations with Con-way.

With the current freight environment remaining sluggish, oil and gas prices up, and a high amount of excess capacity still available throughout the trucking industry, Schmidt noted that Con-way Truckload’s its customer base is largely made up of a service-sensitive niche of shippers, which somewhat “insulates” the carrier from economic and market downturns, because shippers cannot buy good service at a lower price.

“We are a good value-proposition with respect to service and rates, and we are not changing that or our operating philosophy,” said Schmidt. “Our operating philosophy has always been: our rates include trucks. It may be oversimplified, but the fact of the matter is there are a lot of carriers out there that overbook—especially as fuel prices go up—as an operational model. They do this by design. So, what happens is their rates include trucks when trucks are handy and when deadhead is minimized. Our basic operational model has not changed.”

The advantage of this, said Schmidt, is that Con-way Truckload has a lot of internal truckload spend with Menlo to help to do things like backfill lanes and reposition equipment. He said the same goes with LTL spend from Con-way Freight, which provides Con-way Truckload with access to freight it otherwise would not have access to and drives efficiencies. Schmidt explained that this is a competitive differentiator that Con-way’s competitors do not have.

And the current excess capacity situation is actually a major benefit of these synergies during the integration process, said Schmidt.

“It would have been far more difficult to integrate at a time when capacity was tight than it is at a time when there is excess capacity,” said Schmidt. “We would have had to displace other customers or just use a net gain in equipment to increase our co-dependency on our sister companies in the event that we were in a tight environment. Being in a higher capacity environment [for this integration] is a good thing, because you have got the extra capacity to serve Menlo and the extra capacity serve Con-way Freight internally, and you kind of find your space there at a time that you are not hurting for equipment. While we all wish the economy was stronger, there is a silver lining to the cloud.”