The capital chain of the old logistics company was broken, it declared bankruptcy, and thousands of employees lost their jobs

Recently, there was news that US Logistics Solutions, a veteran logistics company in the United States, declared bankruptcy, a decision that directly affected the livelihood of more than 2,000 employees.

US Logistics Solutions is a privately held company with over 30 years of history. In 2021, private equity firm TerOaks Group paid $20 million to acquire Forward Air, which was subsequently renamed US Logistics Solutions.

With 500 drivers and 732 tractors and 19 freight terminals in the U.S., the company is focused on providing consolidation services to retail, healthcare, parts distributors, hospitality and other specialty industries to optimize the entire supply chain by providing scheduled delivery services, supplier pick-up and consolidation, logistics and container freight terminal services that reduce transit time, handling and operating costs.

Despite having a good business model, US Logistics Solutions has not been able to get out of financial trouble. According to the news, the company is facing a serious debt crisis, with the number of creditors between 1,000 and 5,000, the accumulated liabilities estimated at $100 million to $500 million, and the valuation of the company's assets between $50 million and $100 million.

Reasons for bankruptcy

On June 20 of this year, more than 2,000 employees of USLS, including truck drivers, warehouse and dock workers, and office personnel, received notice that the company was ceasing operations and that they would no longer pay salaries as of the 21st.

Just a few days ago, Eric Culberson, the president of USLS, officially announced the closure of the company on LinkedIn, the world's largest professional networking platform.

So, what exactly caused this company to go bankrupt?

According to Culberson, the sudden decision of the company's owner, Ten Oaks Group, to shut down the business was the main reason for the company's bankruptcy. Previously, Ten Oaks Group had been trying to get more money from its lenders but was unsuccessful, which undoubtedly accelerated the bankruptcy process of USLS.

At the same time, the loss of several of USLS's major clients, such as Barnes & Noble, one of the world's largest brick-and-mortar bookstore chains, and Bath & Body Works, a U.S. retailer of personal care and beauty products, also dealt a major blow to the company's finances. In particular, the loss of Bath & Body Works, a contract worth about $30 million, may be related to the fact that former CEO Roger Gellis joined rival Pathmark as president in 2021. A lawsuit alleges that Gellis violated confidentiality, non-compete, and non-solicitation agreements, which not only harmed USLS's business, but also severely weakened its market position. This was followed by multiple employees moving to Pathmark, further exacerbating USLS's woes.

In addition, internal management problems are also to blame, such as the overpay of management and executive staff, which was pointed out by some former employees.

Of course, adverse changes in the economic environment, coupled with intensified market competition, are also important factors that lead to the loss of USLS's business and eventually bankruptcy. It's worth noting that USLS had already begun multiple rounds of layoffs in the months leading up to the company's closure, which could be a means for the company to try to save itself.

A number of logistics giants have announced layoffs and bankruptcy

In the past two years, the global logistics industry has suffered a series of major shocks.

In the first half of this year, a number of old international logistics companies have declared bankruptcy or significant layoffs.

At the beginning of the year, the Russian logistics giant Network of Automated Dispensing Points LLC (PickPoint brand) was declared bankrupt by the Moscow Arbitration Court due to a financial crisis caused by a decline in turnover. PickPoint was once the leading logistics operator in the Russian market, serving around 6,000 parcel terminals at its peak.

In February, TBL Logistics, which specializes in the transportation of refrigerated containers and oversized cargo, declared bankruptcy liquidation in February.

In March, Tony's Express, a long-established LTL transportation company in the United States, suddenly shut down, leaving more than 200 employees unemployed. At the same time, Pride Group, North America's largest transportation and logistics company, a century-old company that was once on the list of Canada's 500 Best Growing Companies, officially filed for bankruptcy protection, saddled with more than $1.8 billion in debt. The company used to have 14 trucks, 724 tractors, 2,411 trailers and 14 freight terminals.

Also in May, American trucking companies Patriot Transport and Expeditor Systems declared bankruptcy and sought restructuring.

In addition to bankruptcies, a wave of layoffs has also swept the logistics giants. At the beginning of the year, Flexport, a technology logistics company, announced a new round of layoffs, which will cut 20% of its global workforce, or about 500 people, which means that the cumulative number of layoffs in the past year will reach 1,800, accounting for almost half of the total workforce.

In the first quarter, global express delivery giant UPS announced that it would lay off 12,000 jobs, or 2.4% of its global workforce, in a move that is expected to save $1 billion. Soon after, UPS announced that it would sell its truck brokerage business, Coyote Logistics, for $1 billion.

In March, German rail freight company DB Cargo planned to lay off 1,800 employees and is facing serious financial difficulties and is under investigation by the European Commission.

In April, international logistics giant Kuehne+Nagel launched a global organizational restructuring, which is expected to involve about 1% of its workforce, and some employees will be transferred to new departments.

In June, FedEx announced 1,700 to 2,000 job cuts in Europe as an ongoing measure to reduce structural costs. The layoffs are expected to cost $250 million to $375 million, saving $125 million to $175 million annually from fiscal year 2027. At the same time, there was also news of a possible future sale of its freight business......

summary

A number of logistics and supply chain giants are facing closures and layoffs, a phenomenon that reflects the multiple challenges that the global logistics industry is facing. The reasons for this can be attributed to the following factors:

1. Weak global economy and shrinking consumer demand: The slowdown in economic growth has led to a decline in global consumer demand, which directly leads to a decrease in freight volume, and a decline in the business volume and income of logistics companies, especially during the economic crisis or recession, this impact is more significant.

2. The contraction of the capital market and the increase in financing difficulty: investors' pessimistic expectations for the economic outlook have led to a decrease in investment in logistics companies, limited financing channels, coupled with shrinking demand, under the double blow, the survival pressure of enterprises has increased, and the living space of logistics companies has been seriously compressed, and extreme measures such as layoffs and even bankruptcy protection have to be taken.

3. Overcapacity and deterioration of cost structure: The overcapacity of the logistics market has exacerbated the price war, and the situation of oversupply has prompted the price competition to become fierce and the profit margin has been compressed; At the same time, operating costs such as fuel, labor, and maintenance expenses are rising, and corporate profitability is weakening, falling into a vicious cycle of layoffs and closures.

The combination of these factors constitutes an unprecedented period of change in the global logistics industry, with logistics giants having to face multiple challenges such as financial crisis, fluctuating market demand and rising operating costs. In response to these challenges, many companies are adopting measures such as strategic restructuring, layoffs, and cost control in an effort to survive and thrive.

Author | Logistics Mahjong Hu

Source | Logistics Salon

This article is the author's personal opinion and does not represent the position of Logistics Salon