Consolidated Freightways files for bankruptcy; Canadian subsidiary not affected

by Canadian Shipper

Consolidated Freightways Corp. , the 73-year old freight transportation company and third largest less-than-truckload carrier in the U.S., is shutting down.

The company told employees in various telephone communications yesterday that it would discontinue operations effective immediately, and that — in order to assure the orderly liquidation of the business — it planned to file petitions for Chapter 11 bankruptcy on Tuesday.

Operations of the company’s CF AirFreight and Canadian Freightways, Ltd. subsidiaries are continuing normally, and their employees will not be terminated as a result of this action.

Management employees of CF’s U.S. operations were briefed in a 9AM conference call. Supervisory personnel received calls from their managers shortly thereafter. All drivers and freight terminal employees received instructions at their homes to call a toll-free number, where they heard a recorded message from John Brincko, CEO of the company, telling them not to report to work Tuesday.

In letters to be mailed to each employee , the company said it had “been vigorously exploring ways to restore the financial health of the company. We expected that recent discussions with our banks, other lenders and real estate investors would enable us to obtain significant additional financial resources and that, together with the combined efforts of employees, we would be successful in our restructuring efforts. “Unfortunately, this has not been the case. Nor do we have the current resources necessary to sustain the business without additional financial resources. Therefore, it is with sadness and regret that I must inform you that Consolidated Freightways has discontinued operations effective immediately and all CF terminals are closed.”

The company said it planned to file for Chapter 11 bankruptcy today. It expects to file its Form 10-Q for the period ending June 30, 2002 at the same time. In his remarks to employees, Brincko said that, despite the severe restrictions imposed on the credit, insurance and real estate markets since the events of September 11, “and in my very short three months here, I was hopeful that, with the right moves at all the right times, we could be successful in turning the company around.” . Brincko said that until very recently, the company was hopeful it could secure additional financing. However, he said that when one of the company’s surety bondholders cancelled coverage related to the company’s self-insurance programs for worker’s compensation and vehicular casualty, it negatively impacted discussions with all lenders and investors.

Ultimately the company was unable to secure financing and to bridge the surety bond gap, at which point the situation became critical. Moreover, the company anticipated that a second insurer would also cancel coverage.

“Without the availability of further financing, the Board of Directors reluctantly concluded that the company simply could not continue to operate, pay employees and meet its obligations,” Brincko said. Approximately 15,500 employees are impacted by the CFC shutdown. Of these, more than 80 percent will receive termination notices immediately. The remaining management and supervisory positions will be phased out in an expeditious shutdown of the company.

Consolidated Freightways was founded in Portland, Ore. in 1929. The company provides less-than-truckload (LTL) transportation, airfreight forwarding and supply chain management services throughout North America. The company is headquartered in Vancouver, Wash. –

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