In a stunning move that will have a ripple effect across the Northeast, less-than-truckload (LTL) goliath New England Motor Freight (NEMF) is going out of business after filling for bankruptcy, as reported by FreightWaves and the Wall Street Journal.
The company with revenues over $400 million is the 19th largest LTL carrier in the US and covers parts of Canada. The bankruptcy filing comes after two years of loses which combined with high labor costs as well as the driver shortage made continuing operations unsustainable. Onerous contracts with very large shippers, including Amazon forced NEMF to operate under very thin margins, exacerbating loses. Currently, LTL capacity is so tight that the market cannot efficiently absorb NEMF’s contracts at the prices shippers are accustomed to. This could increase costs throughout the supply chain.
A line from NEMF’s chief restructuring officer Vincent Colistra is telling “We have worked hard to explore options for New England Motor Freight, but the macro-economic factors confronting this industry are significant.” From onerous regulations, to high insurance rates, to a barrage of nickel and dime fees, not to mention labor recruitment and retention, the trucking industry is being hammered from all different directions. Most trucking companies operate on slim margins ranging from 1.5-2 percent. At the same time most trucking companies are small, regional operations. That a titan like NEMF was operating on the same margins should scare everyone, not just those in trucking. Most businesses operate on small margins as well, frankly, most consumers live paycheck to paycheck. Trucks deliver everything from basic, everyday necessities, to life saving materials, to luxury goods. If delivering these goods becomes unsustainable, if the cost of goods and services becomes to high, then we are in a whole world of trouble.