Jevic Transportation files Chapter 11

Another trucking carrier closes down, sending a message to freight buyers

By Dave Hannon -- Purchasing, 5/22/2008 7:34:00 AM

Call it a sign of the times. When private equity firm Sun Capital bought less-than-truckload carrier Jevic Transportation in July 2006 from SCS, rising diesel fuel prices in the $2.50/gallon range were a concern but the LTL market was still a carrier’s market with rates and fuel surcharges high.

This week, when Delanco, N.J.-based Jevic Transportation closed its doors and filed for Chapter 11 bankruptcy protection, diesel fuel costs $4.50/gallon and the LTL market has clearly flipped to a buyers’ market with many logistics buyers saying they’ve renegotiated contracts with LTL carriers for reduced rates. Add to that credit market and insurance costs and it's easy to see where Jevic's problems originated. In fact, according to the American Trucking Association, 935 trucking companies, each with a minimum of five trucks, went out of business in the first quarter, with most citing the record-high diesel costs.

The takeaway for freight buyers: Talk to your carriers. While the current buyers’ market for trucking may provide an opportunity to renegotiate, many carriers are clearly struggling and getting a good rate from a carrier that’s about to go bankrupt is much more costly in the long-run.  

In a statement posted on its web site this week, Jevic CEO David Gorman told customers, “The current high fuel costs, economic downturn, increasing insurance costs, and tightening credit markets have made this decision necessary.”

But Jevic’s struggles were well-documented even when Sun Capital took it over. In 2005, prior to its sale, Jevic as a division of SCS reported only Jevic unit saw a mere 3% increase in a strong year for trucking. Jevic was originally bought by Yellow Corp. in 1999 and went with SCS when it was spun off from Yellow in 2002.
 

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