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One of the trucking industry’s leading economists says the abrupt shutdown of New Brighton, Minn. -based carrier LME Inc. is an indication that trucking companies that are poorly run could be in deep trouble if the economy slows.
“There is no question industry conditions are not nearly as strong as they were a year ago,” Noel Perry of Transport Futures told Transport Topics. “If you’re a carrier that was barely breaking even a year ago, despite all of the wonderfulness we had a year ago, you’re in trouble now because industry conditions are tougher. Fleets that can’t make money have run out of time and money.”
Less-than-truckload carrier LME posted an updated notice on its website July 14 that said the employees who were unexpectedly laid off July 11 would not be getting paid soon.
“Unfortunately our lender is in control of all finances. The lender must be paid all monies owed to the lender first before payment can be made to the employees,” the notice said. “This process will take at least 90 days, if not longer. Updates will be provided over time.”
This is the second time in 2½ years that the ownership of LME shut down a trucking company. Lakeville Motor Express ended operations under similar circumstances in December 2016. That closure has been in litigation, even before the doors were padlocked, and some of those cases are just now being settled.
This spring, the National Labor Relations Board ordered LME’s owners to begin paying out $1.25 million in back pay, vacation and sick time, and other money owed to its workers. Lakeville Motor Express was a unionized company and had a contract with the Teamsters union.
In its decision, NLRB said LME was the “alter ego” of Lakeville Motor Express. A Teamsters official told Transport Topics that LME’s closing should not impact the payouts for its workers. The NLRB decision also said if the company does not make its payments on time, or misses a payment, the amount will increase to $2.4 million.
“They still owe these people the $1.25 million. I have not been told by anybody that they are not going to make good on that,” said Tom Erickson, the president of IBT Local 120 in Blaine, Minn.
“This family is notorious for doing this kind of stuff. But I don’t believe they’re going to get out of paying the $1.25 million.”
Workers owed that money recently received their first installment payment.
Erickson said NLRB insisted the company put up collateral in terms of assets to make sure the union workers get the money they’re owed. The Teamsters did not have a new contract with LME.
LME officials did not return phone calls from Transport Topics, and multiple attempts to reach the company’s owners have been unsuccessful.
LME has listed some of its customers including 3M, Toro, John Deere and Osram Sylvania. The Minnesota Department of Labor and Industry said it was notified July 12 of the unexpected closing.
“DLI will assess the situation and determine what is the appropriate action for our agency to take if wages were not paid to these employees,” spokesman James Honerman told TT.
In January 2017, Lakeville Motor Express filed for Chapter 7 bankruptcy, which does not involve a requirement to set up a repayment plan. The attorney who is the trustee in that bankruptcy case, John Stoebner of Minneapolis, told TT the Central States Pension Fund is suing Lakeville Motor Express for allegedly defaulting on its pension requirements. A hearing is set in federal court in Minnesota on Aug. 26. When Lakeville Motor Express shut its doors in late 2016 and later filed for bankruptcy, the pension fund charged the company’s liability was more than $90 million, according to court documents.
Falcon Transport laid off 550 workers April 27. (TT File Photo)
LME’s closure is just the latest sign of a slowing trucking industry. In June, TFI International Inc. said it was shutting down its 150-truck Highland Transport division. New England Motor Freight announced its bankruptcy filing in mid-February. In April, Eastern Connection, a 35-year-old regional carrier hauling freight from Maine through Virginia, said it was closing. Also in April, Falcon Transport closed, laying off 550 workers. And after 40 years in business, Ceres, Calif.-based Timmerman Starlite Trucking Inc., an agricultural hauler with 30 employees, closed July 12.
TFI said it is trying to help find its drivers other positions within the company.
“We shouldn’t overreact. But there is no question economic conditions are not nearly as strong as they were a year ago,” Perry said. “Depending on what source you look at, they’re either back to normal, or a little less than normal. The economy is slowing.”