Three more shipping companies file for Chapter 11 bankruptcy
According to The Street, The Covid-19 pandemic wreaked havoc on businesses across various sectors, and the trucking industry was no exception. As businesses shut down, demand for goods initially plummeted, disrupting the supply chain. Factories and warehouses either reduced their output or closed entirely, leading to a decline in trucking services. The industry faced significant layoffs in 2020, with 88,000 trucking jobs lost and over 3,000 companies shutting down, according to the Commercial Carrier Journal. Many truck drivers left the industry, seeking employment in other sectors, and did not return.
The Driver Shortage and its Consequences
When the pandemic began to subside, the trucking industry encountered a severe shortage of drivers. By 2021, there was a record shortage of more than 81,000 drivers, as reported by truckinfo.net. This shortage had a profound impact on the industry, causing a spike in operational costs, supply chain issues, and widespread shipping delays. Companies had to offer higher wages to attract drivers and faced increased costs from turnover, recruitment, and training.
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Despite these challenges, thousands of new drivers entered the industry as freight rates began to climb in 2021. By July 2023, the number of registered for-hire drivers had surged by 96%, reaching over 475,000, according to Time. However, this recovery was short-lived, as rates started to fall in 2022, and the price of diesel fuel more than doubled.
Economic Challenges Facing the Trucking Industry
In addition to falling freight rates, trucking companies grappled with rising inflation, high interest rates, and the escalating costs of insurance and wages. Large national trucking companies like J.B. Hunt Transport Services, Knight-Swift Transport Services, and XPO Logistics applied significant pressure on smaller companies, which often struggled to generate sufficient revenue to remain viable.
Financial Distress and Bankruptcies in the Trucking Sector
The financial distress within the trucking and logistics industry led several companies to file for bankruptcy. Some companies chose to reorganize under Chapter 11, while others opted for Chapter 7 bankruptcy to liquidate their assets and exit the industry.
Freight forwarder Boateng Logistics closed its business after filing for Chapter 7 bankruptcy on February 22, 2023, with plans to liquidate. Similarly, Arnold Transportation Services, a 92-year-old trucking company, shut down operations and laid off all employees five days before filing for Chapter 7 liquidation on April 30, 2023.
U.S. Logistics Solutions, a shipping company owned by private equity firm Ten Oaks Group, also filed for Chapter 7 bankruptcy on June 21, 2023, in the U.S. Bankruptcy Court for the Southern District of Texas. The company ceased operations, laid off employees, and planned to liquidate its assets.
Recent Chapter 11 Filings in the Trucking Industry
In July 2023, three more Florida-based trucking companies filed for Chapter 11 bankruptcy to reorganize their businesses. Miami-based AB Brothers USA and its affiliate, A1 Transport Network, filed for Chapter 11 protection on July 20, listing over $593,000 in assets and $1.05 million in liabilities. Their largest creditor, Crossroads Equipment Lease & Finance, is owed more than $233,600.
McAlpin-based AOG Trucking filed for Chapter 11 on July 17, reporting between $1 million and $10 million in both assets and liabilities. The company’s largest creditor, BMO Harris Bank, is owed over $713,500. While the companies did not specify reasons for filing in their petitions, the economic struggles of the industry, including rising costs and falling freight rates, likely played a significant role.
The trucking industry continues to navigate these turbulent times, with both large and small companies struggling to find their footing in a post-pandemic economy.
