Jevic Closes Its Doors After 27 Years in Business
This story appears in the May 26 print edition of Transport Topics.
Jevic Transportation, the heavyweight less-than-truckload carrier and vendor to the chemical industry whose rapid growth at an early age once impressed investors, closed its doors and filed for bankruptcy last week after 27 years in business.
High fuel costs, economic downturn, increasing insurance costs and tightening credit markets were the reasons for the companys demise, David Gorman, the companys chief executive officer, said in a May 19 statement.
Jevic generated $350 million in revenue last year, using more than 1,100 tractors and 1,500 nonunion employees to make breakbulk-free deliveries nationwide through a network of just six U.S. terminals.
Jevic was No. 71 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers and was the 21st-largest LTL on the list, making it the largest carrier failure since the September 2002 closing of Consolidated Freightways.
Company spokesman Peter Robinson, a 17-year Jevic employee, said the carriers point-to-point delivery model made for quicker shipping, but left the company exposed to sudden fuel price increases.
We didnt have 350 terminals across the nation, so that meant we had much longer pedal [pickup and delivery] runs and wed often fill up on the road. Being a hybrid carrier worked well for 24 of our 27 years, when fuel was fairly stable, Robinson said. But in less than 16 months Jan. 29, 2007, to May 19 the national average retail price of diesel jumped 86.4%.
Glen Merkel, chairman of the Distribution & LTL Carriers Association, said, Diesel prices are going up so quickly that fuel surcharges cant recoup the damages. Combined with the slow economy now, its a double whammy. Merkel is also CEO of Davis Cartage Co. of Corunna, Mich.
Bloomberg News reported that Jevic filed for Chapter 11 bankruptcy in Wilmington, Del., on May 20. The wire service said the company listed both debts and assets of $50 million to $100 million.
Jevic was founded in 1981 in the Philadelphia suburb of Delanco, N.J., by entrepreneur Harry Muhlschlegel. He named the carrier for his children: Jennifer, Jeff and Victoria.
By 1997 the company had grown enough that he took it public on Nasdaq, starting at $18 a share. After an initial brief advance, the shares declined steadily to less than $6 a share in early 1999, when they started to rebound.
Yellow Corp., the predecessor of YRC Worldwide, wanted to get into the nonunion LTL business at the time, and in July 1999 bought Jevic for $200 million, or $14 a share. Yellow paired Jevic with Saia Motor Freight Line and some smaller acquisitions to serve as a balance to Yellow Freight Systems longhaul, unionized operations.
The next year, Muhlschlegel, a one-time owner-operator, took his Jevic profits and founded New Century Transportation, offering LTL, truckload and warehousing services in Westampton, N.J. less than 10 miles from Delanco.
Multiple variations on the LTL theme did not work well for Yellow, which spun off the Jevic-Saia combination to Yellow shareholders as SCS Transportation in 2002.
Saia, which still offers regional LTL service, was more consistently profitable than Jevic. In early 2006, after a group of SCS shareholders complained that Jevics losses were dragging down SCS, the companys board sold Jevic to Boca Raton, Fla., private equity firm Sun Capital Partners for $40 million or 80% less than what Yellow had paid for it seven years earlier.
This February, Jevic told customers that rapid cost escalations were becoming troublesome.
While Jevic continues to focus on controlling the impact of these increases by improving operating efficiencies and removing fixed costs, we can no longer avoid passing a part of these costs on to our customers, the carrier told its shippers in a rate-increase letter.
Spokesman Robinson said Jevics shipments ranged from 1,000 to 36,000 pounds, in both the regional and longhaul markets. The LTL routes were the headhauls and truckload runs made up the backhauls.
The point-to-point system meant Jevic did not funnel shipments through a large network of terminals.
Many of Jevics shippers were chemical companies, Robinson said, giving Jevic barrels of paint, cleaning solutions and industrial colorants to haul. Jevic used temperature-controlled trailers to keep the water-based liquids from freezing or getting too hot.
Customers ranged in size from small manufacturers and distributors to members of the Fortune 500, Robinson said. Like the LTL industry, Robinson said Jevics chemical shippers have also been consolidating.
Weve heard from lots of customers since the announcement, telling us how much they liked our services and how good our people are, Robinson said. This was a great company.
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