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Celadon declares bankruptcy, shuts down operations, and leaves 4,000 employees without jobs

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Celadon declares bankruptcy, shuts down operations, and leaves 4,000 employees without jobs
Celadon has closed business operations after declaring Chapter 11 bankruptcy. The shut down is effective immediately and leaves 4,000 workers without jobs.

Updated Dec. 9, 2019; 12:15 pm CT

INDIANAPOLIS – Celadon Group, Inc., among the nation’s top carriers and based in Indianapolis, declared bankruptcy December 9, leaving thousands without jobs and stranded across the U.S. as fuel cards were apparently cut off without notice. The shutdown ended a tumultuous week for the carrier that saw two previous executives charged with federal fraud, leading to over $60 million in losses to company shareholders. The bankruptcy filing is expected to be the largest in the trucking industry’s history.

Announcement came without warning; trucking industry responds

The announcement of the immediate closure of Celadon was largely unexpected by the company’s employees, many of whom found themselves stranded over the weekend as drivers reported fuel cards being cut off, repossession of equipment at the Celadon Indianapolis terminal, and mobile fleet maintenance contractors refusing to respond to requests for assistance from Celadon drivers. Drivers also reported phone calls to the corporate office going unanswered.

The shock of the immediate shutdown wasn’t only a surprise to Celadon employees but to the entire trucking industry. As an industry made up of like-minded professionals, the trucking industry “family” responded in kind. Various drivers, industry advocates, and carriers posted messages on social media sites offering help to stranded drivers. As news of the inevitable spread over the weekend, drivers and carriers shifted focus to helping fellow industry employees.

Many drivers offered rides to Celadon drivers in order to get them closer to home, and others offered meals, showers, and overnight lodging at no cost. Even competing carriers and logistics companies stepped up in support of the drivers.

MVG Logistics posted, “Celadon has shut down and filed bankruptcy, leaving some of its drivers stranded after shutting down fuel cards with no warning …. We just fueled up two Celadon drivers so they can make it home. No, they [Celadon] don’t dispatch or use mvglogistics.com services but we believe in no driver left behind …. A driver is a driver; we don’t care whose team they’re on!”

Several carriers responded to the shutdown with offers of jobs beginning immediately. Hirschbach posted, “If you are a driver looking for a new company to call home, we have recruiters working this weekend to answer questions. If you are not interested in a job with Hirschbach but are in need of a way home, we are offering free bus tickets to Celadon drivers who are stranded.”

Other carriers including Southland Transportation Company, ShipEX, and CRST Expedited offered similar assistance. One Celadon driver stated that recruiters from other carriers were at the company’s Indianapolis terminal making job offers despite the chaos surrounding them.

The company

Celadon Group, Inc., formed in 1985, had grown into one of the largest carriers in the United States, its central location of Indianapolis providing a hub for north- and south-bound routes to and from Mexico and Canada. Based on 2017 data, Celadon operated 3,200 company-owned trucks, along with 400 lease-to-own rigs and 250 owner-operators. The company owned 10,000 trailers.

In 2015, the Journal of Commerce ranked Celadon as the second fastest-growing carrier in the U.S. Three years later, Logistics Management ranked the carrier as the 16th largest in terms of revenue, but the data did show cracks forming. Among the top 25 revenue-generating carriers, Celadon was one of two that saw revenues decrease (-11%) from 2017. In 2019, Transport Topics listed Celadon as No. 38 in its top 100 for-hire carriers.

Timeline of events

The announcement of the Celadon Chapter 11 bankruptcy filing and cease of operations came just days after two former executives were charged with defrauding stockholders by providing intentionally misleading information related to the financial status of the company.

Josh Minkler, U.S. Attorney for the Southern District of Indiana announced on December 5 that William Eric Meek, former chief operating officer of Celadon, and Bobby Lee Peaver, former chief financial officer, conspired to make Celadon more attractive to investors by providing false statements to company accountants and falsifying records. The charges also include conspiracy to commit wire and securities fraud. Minkler stated that both individuals will face “decades” in prison following an investigation by the FBI, U.S. Department of Justice, Postal Inspection Service, and the Securities and Exchange Commission.

The following is a timeline of events as known this morning:

2016: Meek, Peavler, and other Celadon executives knew a substantial portion of its fleet had declined in value due to an industry slowdown, increased maintenance costs, and age. Meek and Peavler devised a scheme to conceal the millions of dollars in losses from shareholders and banks.

May 2017: Celadon announced financial statements for fiscal year 2016 and the first two quarters of 2017 were unreliable, as were independent auditor reports. The announcement sent Celadon stock value into a tailspin, creating a one-day loss to investors of $62.3 million. Celadon was delisted by the New York Stock Exchange. Meek and Peavler immediately left the company.

Early 2019: Celadon agreed to pay $42.2 million in restitution to settle securities fraud charges.

December 5, 2019: Meek and Peavler were arrested on federal fraud charges based on their effort to defraud Celadon stockholders. Prosecutors said their scheme involved the following:

  1. Inflating invoices old older used trucks that they traded for new trucks;
  2. Selling trucks to a dealer near the end of a fiscal quarter without disclosing that a company division, Quality Companies, agreed to pay the dealer back after the quarter ended;
  3. Making false and misleading statements to auditors about the transactions;
  4. Peavler directing a senior executive to delete certain emails after auditors requested relevant documents.

Following the announcement of charges, lenders began repossessing Celadon equipment.

December 6, 2019: Internal Celadon sources began leaking information on the intent to file for bankruptcy as well as notifying its largest customers to find other carriers. It provided no such information to employees, many learning from customers and drivers who had been in contact with customers late in the evening. Shippers began cancelling loads late that evening as well.

December 7, 2019: Comdata, provider of fuel cards for Celadon, shut off cards as drivers reported trucks being repossessed and towed from truck stops.

December 8, 2019: Drivers were provided conflicting data from the carrier’s headquarters, some being told to complete their deliveries and others told to stop and leave their trucks. Reports indicate that employees were instructed to meet at the company’s Indianapolis headquarters this morning

December 9, 2019: Apparently just after midnight, Celadon sent the following message to employees over its electronic messaging system:

**FLEETWIDE MESSAGE: WE REGRET TO INFORM EVERYONE THAT CELADON GROUPT, INC. HAS FILED FOR CHAPTER 11 BANKRUPTCY. WE WILL CONTINUE TO HAUL AND DELIVER ALL LOADS THAT WE NOW HAVE IN TRANSIT. WE WILL HAVE MORE INFORMATION IN THE MORNING AS TO WHERE EQUIPMENT NEEDS TO BE DELIVERED TO. WE HAVE BEEN ASSURED THAT EVERYONE WHO FOLLOWS INSTRUCTIONS WILL BE PAID FOR THE WORK AND THE MILES ASSIGNED AND COMPLETED, AND CELADON WILL NOT LEAVE ANYONE STRANDED AWAY FROM HOME. FINALLY, WE TRULY APPRECIATE YOUR COMMITMENT AND DEDICATION TO THIS COMPANY, AND WISH YOU ALL LUCK MOVING FORWARD.

CELADON MANAGEMENT

 

In his Monday morning announcement of the Chapter 11 filing, Paul Svindland, Celadon’s CEO, stated, “We have diligently explored all possible options to restructure Celadon and keep business operations ongoing; however, a number of legacy and market headwinds made this impossible to achieve.”

Reports late this morning indicated Celadon will pay $5.44 million in unpaid wages and termination bonuses. The bonuses amount to approximately $267 per employee. The company’s stock, which sold for over $20 in 2015, was being sold for $.041 per share on Friday, December 6. This morning, December 9, a share could be purchased for $0.03.

The timing of the announcement could not have been worse for most Celadon employees. If there is a silver lining around this cloud, it’s the reinforcement of the fact that the trucking industry, despite competition, comes together as a family and helps its own when turmoil strikes.

EARLIER STORY

INDIANAPOLIS – Celadon Group, Inc. today announced that it, along with its 25 affiliate entities, have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.  Celadon also announced that it will shut down all of its business operations effective as of today, Monday, December 9, 2019.  This shut down does not include the Taylor Express business headquartered in Hope Mills, North Carolina, which will continue to operate in the ordinary course while the Company’s explores a going concern sale of its operations.

Celadon intends to use its Chapter 11 proceedings to wind down its global operations.

Paul Svindland, Chief Executive Officer of Celadon, said, “We have diligently explored all possible options to restructure Celadon and keep business operations ongoing, however, a number of legacy and market headwinds made this impossible to achieve.”  Svindland noted that, “Celadon has faced significant costs associated with a multi-year investigation into the actions of former management, including the restatement of financial statements.  When combined with the enormous challenges in the industry, and our significant debt obligations, Celadon was unable to address our significant liquidity constraints through asset sales or other restructuring strategies. Therefore, in conjunction with our lenders, we concluded that Celadon had no choice but to cease all operations and proceed with the orderly and safe wind down of our operations through the Chapter 11 process.”  To support the wind down of operations, Celadon’s lenders have agreed to provide incremental debtor-in-possession financing.

Svindland further stated, “I would like to thank our vendors, customers, and lenders, and most importantly, I would like to thank our dedicated administrative employees and drivers whose efforts should not be seen as a reflection of this Chapter 11 filing.  They have sacrificed so much of their time and effort for Celadon, and for that, the Company is eternally grateful.”

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3 Comments

3 Comments

  1. Gionni Socci

    December 10, 2019 at 6:30 am

    I don t work for Celadon,but I knew this day was coming,I guess the only ones who didn t know were the employees.
    There is no more blind than the one who refuses to see.
    The old man left the company in a bad shape,it just went down from there,poorly managed,wasted money,unethical management.
    It truly is a study case of what not to do when you are on top.
    How the mighty has fallen.
    Werner Enterprises is next.

    • alan harding

      December 11, 2019 at 1:33 pm

      theirs going be alot more company going down and out after xmas because of higher fuel and drivers shortage

  2. JohnS

    December 13, 2019 at 4:24 am

    Trucking went downhill long time ago, and has only gotten worse with increased emissions on trucks, too much competition driving rates down and fuel costs staying high as well as trying to keep drivers with wage increases. Let’s also not forget the cost of operations, equipment purchases and things like weather and other factors. I got out of trucking couple years ago mainly for health reasons, but also because I saw the struggles as a owner operator and as a company driver. The implementation of electronic logging hasn’t helped either in terms of drivers being productive and companies getting freight moved. Its a variable industry trying to be forced into a micro managed time constraint. Its actually incredible that any company can survive with so many negatives affecting it. We shouldn’t wonder why fraud was involved with Celedon because its become a way of staying alive in a tough industry of storms.

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Mack Trucks laying off 305 workers at Macungie Township plant

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Mack trucks laying off 305 workers at macungie township plant
A Mack Trucks spokesperson said the company operates in a cyclical market and after two years of extremely high volumes there has been reduced market demands. Sales of Mack Trucks in October have fallen far below the monthly average for 2019. (Courtesy: MACK TRUCKS)

MACUNGIE, Pa. — Mack Trucks plans to lay off 305 employees at its assembly plant north of Philadelphia, the company said Wednesday.

Mack blamed the layoffs at its Lower Macungie Township plant on a downturn in the heavy-duty truck market. They will take effect at the end of February, The Morning Call of Allentown reported. The cuts represent about 13% of the plant’s payroll.

“We regret having to take this action, but we operate in a cyclical market, and after two years of extremely high volumes, we have to adapt to reduced market demand,” said Mack spokesman Christopher Heffner.

Employees, most of whom belong to the auto workers union, were informed of the news Wednesday.

The cuts were expected after Mack said last month that it would need to slow production to cope with reduced demand. Mack expects the North American truck market to be down nearly 30% this year

Heffner said outplacement support meetings will be provided for all affected employees, who also will receive information about services available through the Private Industry Council and Pennsylvania CareerLink.

United Auto Workers Local 677, which represents most of the plant’s employees, did not immediately comment.

But the planned layoff was expected, after Mack informed employees in December that it would need to adjust the plant’s build rate to align with reduced demand. The last significant layoff at the Mack plant came in early 2016, when the company laid off about 400 of the facility’s then-1,850 workers as demand slowed.

Through November of 2019, sales of Mack Trucks in the United States had totaled 18,127, an increase of 14.8% over sales of 15,793 during the first 11 months of 2018, according to data provided by Wards Intelligence.

But sales in October and November were 1,224 and 1,185, respectively, well below the average monthly sales of 1,647 during 2019.

The announcement about the layoffs came some three months after almost 3,600 United Auto Workers members walked off the job for the first time in 35 years on October 12 at six Mack facilities in Pennsylvania, Maryland and Florida.

According to the official news release on the UAW’s website, the strike is to protest unfair pay, compensation and benefits for workers and their families.

“UAW members get up every day and put in long, hard hours of work from designing to building Mack trucks,” said Ray Curry, secretary-treasurer of the UAW and director of the heavy truck department, in the official statement when the workers went on strike. “UAW members carry on their shoulders the profits of Mack and they are simply asking for dignity, fair pay and job protections.”

Two months later, Mack Trucks announced that members of the United Auto Workers union ratified a new four-year collective bargaining agreement with the company that covers the union employees.

 

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Early morning crash on Pennsylvania Turnpike leaves 5 dead, 60 injured

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Early morning crash on pennsylvania turnpike leaves 5 dead, 60 injured
The Sunday morning accident on the Pennsylvania Turnpike was said to have been a “chain reaction” following a bus losing control and rolling over. (Courtesy: FOX29 PHILADELPHIA)

MOUNT PLEASANT, Pa. ­– A crash on the Pennsylvania Turnpike early Sunday morning has left five people dead and about 60 injured when a loaded bus went out of control on a hill and rolled over. According to published reports, this incident set off a chain reaction that involved three tractor-trailers and a passenger car.

WTAE in Pittsburgh reports that all five victims killed have been identified by the Westmoreland County coroner. Among them are the bus driver, Shuang Qing Feng, 58, of Flushing, New York and two bus passengers, Eileen Zelis Aria, 35, of Bronx, New York and Jaremy Vazquez, a 9-year-old girl from Brooklyn, New York.

Two UPS drivers – Daniel Kepner, 53, and Dennis Kehler, 48 – were among the people who died in the crash, the company confirmed Sunday night. Both were driving together in a tractor-trailer out of Harrisburg, Pa., according to a UPS spokeswoman.

Those injured ranged in age from 7 to 67. All are all expected to survive, though two patients remain in critical condition, authorities and hospital officials said Sunday afternoon. The crash, which happened at 3:40 a.m. on Sunday on a mountainous and rural stretch of the interstate about 30 miles east of Pittsburgh, shut down the highway in both directions before it reopened Sunday evening.

The tour bus, operated by a New Jersey-based company called Z & D Tours, was traveling from Rockaway, New Jersey, to Cincinnati, Ohio, Pennsylvania State Police spokesman Stephen Limani said.

He said the bus was traveling downhill on a curve, careened up an embankment and rolled over. Two tractor-trailers then struck the bus. A third tractor-trailer then crashed into those trucks. A passenger car was also involved in the pile-up.

“I haven’t personally witnessed a crash of this magnitude in 20 years,” Pennsylvania Turnpike spokesman Carl DeFebo told WTAE, calling it the worst accident in his decades-long tenure with the turnpike.

Reports from local media state that the victims included students and people returning from visiting family in New York City. Many traveling on the bus were from outside the United States, Limani said, some of whom do not speak English and who lost their luggage and passports in the wreckage.

Limani said the Red Cross was working with those patients to find housing and resources. Authorities brought in translators to assist with the investigation and medical treatment, and to help victims reconnect with loved ones.

Exactly what caused the crash remains unknown, and Limani said it could take weeks or months to determine. The National Transportation Safety Board announced Sunday that it dispatched a team of more than a dozen to investigate.

Officials said it was too early to determine if weather was a factor in the crash, but there were eyewitness reports of precipitation in the area.

Angela Maynard, a tractor-trailer driver from Kentucky, said the roads were wet from snow but not especially icy. Maynard was traveling eastbound on the turnpike when she came upon the crash site and called 911.

“It was horrible,” she told The Tribune-Review. She saw lots of smoke but no fire. She and her co-driver found one person trapped in their truck and another lying on the ground.

More than 90 miles of the Pennsylvania Turnpike, from Stanton to Breezewood, remained closed in the westbound direction. Local fire and emergency medical crews are on scene, along with a hazardous material company cleaning up fuel and other materials.

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California owner-operators granted temporary reprieve from AB5

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Senators offer bill to limit heavy truck speeds to 65 mph
California owner-operators will be exempt from enforcement of AB5 law pending a January 13 hearing. (The Trucker file photo)

SACRAMENTO — Owner-operators and the carriers who contract with them received a reprieve late on December 31 when U.S. District Court Judge Robert Benitez issued a temporary restraining order preventing California from enforcing the state’s Assembly Bill 5 (AB5) law in respect to motor carriers.  The law had been scheduled to go into effect just hours after the order was issued.

AB5, intended to protect employers from classifying employees as independent contractors for the employers’ benefit, was challenged by the California Trucking Association (CTA) in a November lawsuit in which the association claimed 70,000 owner-operators in the trucking industry would be adversely impacted should the law be enforced. Specifically, the lawsuit claimed the state law directly conflicted with the FMCSA, the Federal Aviation Administration Authorization Act of 1994 and the supremacy and commerce clauses of the U.S. Constitution.

AB5 included provisions for an “ABC test” to determine whether an individual would be classified as an independent contractor or an employee of a company. The “B” test prohibited companies from using independent contractors unless the worker performed work “outside the usual course of the hiring entity’s business.” In other words, AB5 would prohibit a trucking company that employs drivers from contracting with independent owner-operators as contracted individuals would perform the same type of work as the company’s regular employees.

On December 24, CTA filed for the temporary restraining order, intended to prevent California from enforcing AB5 as related to motor carriers operating in the state. The original lawsuit is scheduled for a hearing on January 13.

In granting the temporary restraining order, Judge Benitez issued a five-page decision in which he wrote that CTA had suitably satisfied the requirements of arguing its original lawsuit was “likely to succeed on the merits” and plaintiffs would be “likely to suffer irreparable harm in the absence of relief.” Several lawsuits had been filed against AB5 from various sectors of the transportation industry, leaving in question whether the law would be enforceable in the form approved by the California legislature and signed by Gov. Gavin Newsom in September.

In the leadup to initiation of AB5, in late 2019, carriers began reducing contracting activities with owner-operators.  Some carriers had ceased all work through independent drivers, while others recommended California-based owner-operators move out-of-state or take on the status of company employees.

Benitez noted in his decision, “Without significantly transforming their operations to treat independent contractor drivers as employees…they face the risk of governmental enforcement actions, as well as criminal and civil penalties.”

Judge Benitez will also hear CTA’s case for a longer injunction Monday, January 13, in his courtroom in the Southern District of California. Defendants in the lawsuit include California Attorney General Xavier Becerra and The International Brotherhood of Teamsters, which has intervened in the case. For two weeks, independent truck drivers in California are protected from the state’s enforcement of AB5 in their industry. Whether an additional extension is granted is dependent on Judge Benitez’s ruling, expected shortly after the January 13 hearing.

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