Labrie steps down as head of Con-way Freight
August 24, 2010
Transportation and logistics services provider Con-way Inc. said today that John G. Labrie, president of Con-way Freight, the company’s less-than-truckload (LTL) subsidiary, has left the company to pursue other interests.
Con-way officials said that Con-way President and CEO Douglas W. Stotlar has assumed the role of interim President of Con-way Freight and will fill the position for the next six-to-12 months. The company said that during this time Con-way Freight will focus exclusively on increasing profitability through yield management, cost reduction, and operating discipline.
“Con-way Freight has built a 27-year reputation as a premium carrier in all respects,” Stotlar said in a statement. “The management changes announced today are intended to ensure that we retain this position, and that we deliver to our shareholders, customers and employees the trust, consistent market-leading performance and sustainable value that have been the foundation of our success for nearly three decades.”
Company officials decline to provide further comment on this announcement.
Second quarter revenue at Con-way Freight—at $817 million—was up 25.8 percent, with yield down 2.1 percent year-over-year—6.4 percent excluding fuel surcharge. Tonnage per day increased 29.2 percent, and operating income of $17.2 million was down compared to $49 million last year.
“Demand significantly exceeded our forecast [for Con-way Freight] as the result of an unexpectedly strong economy,” said Stotlar during the company’s earnings call earlier this month. “Our volumes reached record levels starting in March and continuing through the second quarter. This presented several challenges, most notably the pace at which volumes came on created a significant hiring need.”
In the second quarter, Con-way Freight hired 3,200 new employees, whom were on-boarded, coupled with labor costs associated with higher volumes increasing, as well as higher costs due to overtime, rental expenses, and purchased transportation.
“One of our goals during the quarter was to relieve some of the pressure on our system while working to moderate our record volumes,” said Stotlar. “As we progressed through the quarter on a year-over-year basis, April tonnage per day was up 37 percent, May was up 28 percent, and June was up 23 percent. We expect to see sequential volumes moderate through the rest of this year, as we continue to focus on increasing price.”
Stotlar also said on that call that Con-way is seeing modest improvement, due to stronger demand, industry actions, and Con-way’s own specific initiatives. He added that benefits, strong demand, and improving pricing were offset by increased operating costs related to record volumes in the Con-way Freight network. And the task of moderating record volume while increasing price will take time to resolve and will curtail expectations for operating margin expansion in the near-term.
While Con-way said it is focused on increasing profitability through yield management, cost reduction, and operating discipline at Con-way Freight, Robert W. Baird analyst Jon Langenfeld wrote in a recent research note that this process is likely to take a while.
Langenfeld wrote that Con-way Freight’s second quarter, year-over-year volume growth was driven by the residual effects of an imbalanced pricing strategy in 2009 and lack of decisive action to cull unprofitable freight late last year and early in 2010.
“As a result, [Con-way’s] yield contraction continued given slow progress in improving pricing and purging unprofitable freight,” wrote Langenfeld. “However, this process takes time and while absolute yields weigh on near-term profitability, some signs of improvement are evident. [Con-way’s] actions to improve pricing are consistent with industry sentiment that has materialized as volumes improved.”
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