Never Stand Still

Not that I know of. Conway was more trucking regional 1-2 day shipments.

 

Hi friends back again with another installment, as we continue with CF in the late 1980s growing there air freight operation.

In the late 1980s CF bought out Emery Air Freight which turned into an absolute mess for CF.
Emery Air Freight was a company that wasn't doing very well and they had a year earlier merged with an over night package delivery company that also was not doing well, even worse CF decided they needed to grow share and grow capacity so they bought out Emery air freight.

In the process of buying out Emery Air Freight they also got Purolator Air Freight which turned out to be a real dud of a company. Also during the buyout process CF found out Purolator Air Freight was never fully integrated into Emery Air Freight even though Emery bought out Purolator. This caused big trouble because Purolator didn't have the best accounting practices and CF sent one of there big wig accountants up to Scranton, PA the headquarters of Purolator Air Freight to try to sort out there accounting and he couldn't figure there accounting out and it was a big mess.

Furthermore, as this disaster of a merger unfolded CF decided that now that they owned Emery plus there own other CF branded and marked air planes CF decided that they had now control of the skies and made some statement LOL, about Emery Air Freight being a market leader and that market leaders "set the price."

This ended up blowing up in CF's when a reporter published the head line "Berger to Customers: Put Up or Shut Up."

Customers were furious because shortly after that, price hikes took up and customers started dropping Emery Air Freight like a hot potato. And it wasn't like Emery Air Freight had a great reputation Emery and Purolator Air Freight were both in shambles for a reason. CF thought they could just go in there put there CF logo on everything and it would turn the disaster around. Well it didn't work out like that 100%.

To exacerbate problems some dip stick at CF's accounting department who CF won't reveal the persons name, because there so embarrassed the person in CF's accounting department decided to take the highest paying contract that CF had for air freight and make that the new tariff price and just started sending out bills of sky high amounts to all there customers.
Customer billing complaints went from 400 complaints a day to 8000 complaints a day and other customers just stopped paying there bills all together. If they got a bill for $25,000 and they were only used to paying $10,000 they would start sending in checks for $10,000 or what they thought they should pay.

This irked the heck out of CF's accounting they didn't know what to do because they had payments coming in that they could not apply to invoices.

Emery was in terrible shape they were overstating revenue losing money and customers which translates to market share.

CF's profits a whole company dropped significantly in the late 1989 due pretty much to Emery Air Freight dragging the entire CF machine down. Emery Air Freight was a clerical and accounting disaster. In fall of 1989 losses at Emery Air Freight were $18.7 million dollars.

 

In 1990 losses at CF also continued with the trouble in the trucking world. CF's core company CF:


Was going through a huge rate war and fuel price hike in the early 1990s. This caused CF Inc to lose some money.

They even figured that Con-Way which had been wildly profitable and successful would feel a pinch and come fourth quarter 1990 it CF may even have a loss on there books. Now that it's all played out come early 2000s CF had many losses on there books.

Emery Air Freight was still killing CF.

So to reverse things because at the time 1989-1990 CF wasn't exactly having a great time the CF PR machine got out in front of everyone and put on a good show.

Larry Scott at the time took some heat from critics about the crappy acquisition of Emery and Purolator Air Freight.

Now the financial problems at Emery still continue and CF management was not real happy about dealing with Emery's financial problems. So instead they decided to deal with Emery's transport problems. Which was way easier humm what's easier getting out of debt and trying to clean up a huge accounting mess and getting customers back or buying a new straight truck wonder which one is easier? So CF decided to do what places do best and throw money at the problem they threw $75 million at Emery to buy new fancy delivery trucks and up grade there computer tracking shipment.

Now Burger said Emery Air Freight had contracts wit the Post Office and IBM and they were going after bigger more industrial shipments. CF had no interest in mail and small packages they said that if it could be sent by fax machine they didn't want it. Fax machine ha-ha that's also an almost obsolete thing. I think faxes still exist, but I think there kind of obsolete as well.

Anyhow CF's PR department had Berger and Scott give an interview to Forbes Business Magazine and say a bunch of good things about CF and assure people that Emery Air Freight would turn a profit around 1990.

This article bought Scott and Burger some time, in order to straighten things out at Emery Air Freight.

However Emery which by the way there billing system was still in shambles and Scott didn't bother to put that on his repair list well this all blew the heck up when in 1990 Larry Scott had to call the CF board and tell them "I got another one for you, we just lost 40 million at Emery Air Freight and 19 million of that came from flaws in our billing system."

In 1989 Losses at Emery Air Freight totaled $66million dollars and there was also a one time charge for $31.4 million dollars due to facilities closing and other merge problems. The losses were to great and motor freight trucking operations couldn't offset this and in 1989 CF Inc as a whole company lost $35.5 million dollars.

In 1990 things at Emery leveled off and the company still lost money just not as much money. However the losses still mounted up and CF's total debt went from $47.7 million to $486.2 million by 1990. S&P put CF on there Credit Watch List.

CF's books heading into the 1990s were not looking very good and it was sobering for a company that was used to a lot of cash and large big profits and having tons of money.

 

Well as we continue into the late 1980s CF's accounting troubles were still bringing them down. Our next installment we chronicle how CF's debt troubles lead to bankers knocking at there door.

 

That's a good question on what the boards response was. The book is not very clear on that. I can speculate that they were of the "to big to fail mind set." The board seemed to let management at the top do what ever they wanted.

CF had visions of grandure and being this big global company. It was the 1980s go big or go home.

The air freight was part of being a big global thing and they also had other goofy reasons and like Doug A said CF management was like a dog chasing there tail in the 1980s. They were all over the map with everything.

All that money from freightliner they just had to spend burnt a hole right in there pocket. Don't let these companies fool you they love spending money. It's human nature and companies are run by humans and humans love spending money on stuff it's part of the human condition.