Freight and National to merge effective January 30, 2011.

Discussion in 'Fedex Freight' started by Guardrail, Sep 16, 2010.

  1. Dick Dastardly

    Dick Dastardly Drat, Double Drat, and Triple Drat!

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    Yep. I always hate the friends request from coworkers. I have to ignore the request then play it off when it is brought to my attention I haven't accepted them.
     
  2. Redracer3136

    Redracer3136 BANNED

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    Well, it was sent to me by an associate...he gave me the cliff notes and I skimmed through it but got the jest of it pretty quick. Most of the AF guys were aware of the plan so I just saw the author as the former disgruntled manager that he was.
    Not sure as to the reason you guys were allegedly "mislead", I guess they had their reasons. :idunno:
    Agreed, I can see where there'd still be some hurt feelings "behind the scenes" but for the most part guys still get along and have moved on...it's water under the bridge now, why fester on something that's over and done with??
    I try not to worry about things I can't control and focus on the things I can.
     
  3. Frootloop

    Frootloop Well-Known Member

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    There was a thread in 07 or 08 where a fellow said he overheard management talking about a merger but everyone shot him down claiming it was just a rumor and nothing more.
     
  4. FedexLube

    FedexLube Well-Known Member

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    That's true, but ironically we all at Truckingboards knew far in advance of the crap that was about to go down
     
  5. Canadian Flyer

    Canadian Flyer Speedy Freightshaker #411

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    FXFC is barely a player on the national scale. They successfully grew Toronto from a single terminal (TON) to two (WTO & ETO), opened pointless terminals in Cambridge, Hamilton and Ottawa, closed a terminal in Windsor. That's just in Ontario. The London terminal is the same armpit yard it was when Watkins moved in.

    In Quebec, they opened an EOL terminal in Quebec City. Montreal is still operated out of a terminal owned by TransForce and shared with at least 2 other LTL's.

    Attempted expansion to Halifax failed. East coast freight, picked up from Bangor, ME, is contracted to Armour.

    Winnipeg has grown, but is still an independent EOL that's only connected to Fargo, ND.

    Vancouver was contracted to Canadian Freightways after the expansion there failed (reasoning will not be discussed). FXFC still runs the linehaul to Seattle and Calgary out of there but that's it.

    Calgary and Edmonton service each other, Vancouver and Butte, MT. I believe Edmonton was a FedEx expansion, and Calgary was expanded with a new terminal.

    It seems like FedEx isn't sure what to do with FXFC. I proposed to Operations while I was still a contractor there that they should link Winnipeg and Toronto using teams like Reimer does. They claimed there wasn't enough freight volume.
     
  6. Frootloop

    Frootloop Well-Known Member

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  7. johndeere4020

    johndeere4020 Well-Known Member

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    One of our guys went to Chicago to do his new hire training in July of 2010, a lady up there told them the next month she was getting ready to go to National terminals and train them on the freight system for a merge. We asked about it and were told it was a rumor and would never happen. Shorty after the announced it, the whole thing was a debacle start to finish. I used to run into National drivers on docks everyday, anyone that couldn't see that wouldn't last was blind why would you want the redundancy? @Gator the management at your terminal has always sucked, there was a couple good ones Ice for example but the rest suck. For the record the ones that came from Cincinnati National weren't anything to brag about, remember Lance?
     
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  8. Gator

    Gator Outstanding Member

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    Yes I do, Lance was a idiot from the get go.
    I rode down with our HR person chiming in on the management trio we had but he wanted no part of it. ICE is in DAY now and doing well.
    We are losing a good dispatcher to OD. Because they would not promote him here.
    He worked with drivers and there needs and the terminal does not like that.
     
  9. johndeere4020

    johndeere4020 Well-Known Member

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    HR guy, was he the one with big ears? I can't remember his name. I knew Ice was over there and they like him. I also heard about your dispatcher leaving, that seems to be par for the course.
     
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  10. Gator

    Gator Outstanding Member

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    Yes with the ears, he set up office here after the merge but as of the last six months he hasn't been here. Never said anything of leaving. Just more of the same drag here
     
  11. SwampRatt

    SwampRatt Well-Known Member

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    Oh my... Mark this day in history (3/24/2017). The day CF (with all due respect), was absolutely wrong. :poke:Doesn't happen often, which makes it worthy of note.

    Nobody pays $780 million, in 2006, for Canadian authority. $942 million in today's dollars.

    A lot happened, industry/economy/Company wise, over those years.

    The purchase was an asset only acquisition. Almost all Watkins personnel were hired by FedEx, although some were not. I recall something about a "do not hire list" that prevented some...
     
  12. SwampRatt

    SwampRatt Well-Known Member

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    Like, or not, it is still wrong. You seem to have duped our esteemed member from the north into your theoretical revisionist history lesson.

    Your premiss is flawed (again), from the get go. You are only correct that it never involved “making them a viable company". They were already a billion dollar company, quite good at doing most of what they did. Period.

    Keep in mind, FedEx has never been in the business of buying failing companies, in hopes of turning them around. No, they buy solid companies to integrate into, and complement, the portfolio.

    Again, no one spends $780 million for operating rights to Canada. That would be $942 million in today's dollars. Unless you can show me a REI on that kind of money, we must dismiss the theory as nonsense.
     
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  13. SwampRatt

    SwampRatt Well-Known Member

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    Again, a flawed premis. A billion dollar company, perfectly viable, purchased to complement the regional and semi-regional offering of the time.

    As far as being unaware, Do you think it would be ethical/legal to also mislead the stockholders, as would have been the case, under your theory?

    Customers said they wanted a cheaper long haul/heavy weight option. Sales wanted it in order to complete the “bundle of services” in order secure that segment of the market.

    Yes, Canada was part of that need, but only a part. The icing on the cake, the cherry on top, if you will. NOT the whole cake.
     
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  14. SwampRatt

    SwampRatt Well-Known Member

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    Nonsense. 1St off, the guy was not the digruntled type. He remained throughout, moving up to the position of MD of Human Resources, in Memphis. There he was exposed to the “true culture of FedEx”. He gave FedEx the highest praise for the culture and operation, at that point. I think he termed it "The real FedEx". The culture in Memphis was quite different than the culture of Harrison, at that time.

    Remember this? “Watkins management will remain in place, with Chip Watkins serving as president. He will report to Patrick L. Reed, executive vice president and chief operating officer of FedEx Freight, who has responsibility for all U.S. LTL operations.”

    I like and respect Pat Reed (a lot) as the closest thing to Sheridan Garrison we had, but... forcing the Watkins/National operation side to run on the same model as AF/Freight side was unwise, costly, and NOT that team's brightest hour. Watkins methods (while different) were effective (often superior) in some ways, due to a completely different target market. FedEx failed to integrate the culture, at that time. Also failed in oversight by having National answer to Freight.

    Add to that an economic climate that restricted (actually constricted) growth, and you have the recipe for disaster. To their credit, they did come upon the idea to combine National/Economy and Freight/Priority into the same operation. One truck, two service levels was a brainstorm, born from a relative failure, and an answer to customer demands.

    Often great gains come on the heels of great failures. This was one of those times.

    Trying to be brief...but you must know that each step of the process described in the book coincides directly with what we actually saw on the street. Customers did say they wanted a cheaper long haul option. The purchase gave them that option, but we bungled it much to their dismay. It was too confusing for the customer. Freight, National, Express freight, etc. When we showed up from Freight, we often picked it up, even if it was for National.. 1st, because we were told (by management) that we “could”. 2nd, because during that same time period numbers were being force fed (Yes, FORCE FED), to the point that, if you took the time to go to that customer, you really needed to leave with something to show for your time. Customers were happy, UNTIL they got the bill...

    This was certainly a product of the economy of the time, but also a product of the leadership goal of the time. Freight, run by AF people, wanted numbers first, culture be damned. AF people (who I respect fully) killed National/Watkins, for their own benefit. That's the cleanest version I can offer, and still be true.

    Do we need to recall the Bill Cherry/Bill Logue era?

    All of the above has been confirmed with assorted former Watkins management. Yeah, I asked...

    There was unlikely any malicious intent. More a matter of survival, in a difficult climate.

    Further proof comes after the book ends. Culture declined further, fill in the blanks, Union effort, etc.. Then a turning point. Bill Cherry resigns, Bill Logue retires. Mike Ducker named CEO, in part to integrate and bring back the above mentioned culture, which had been neglected and/or sacrificed.

    And in the end, the Priority/Economy service model is highly successful. Not by original design, but through an evolution. Necessity being the mother of invention...

    Class dismissed.
     
    Last edited: Mar 26, 2017
  15. Gator

    Gator Outstanding Member

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    Yes we where a billion dollar company (Watkins) that went from black to red overnight. The first thing we gave up was the one and two lanes to freight, then the way the terminals went in the red was they where debt free intill after the purchase from FedEx then the purchase debt was put on each terminal which they could never overcome. We where set to fail from the start.
     
  16. Canadian Flyer

    Canadian Flyer Speedy Freightshaker #411

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    The thing you need to understand about Canadian operating authority is that it's very, very hard to obtain for an American carrier, and for good reason. The Canadian government instituted protection laws to ensure Canadian carriers always get priority. Almost every US carrier with a presence in Canada bought another carrier that was based here to do it. The only carriers off the top of my head that were able to get into Canada on their own were Schneider (who spent years negotiating with the government to do it), UPS (who did it years ago when it was easier) and RPS, now FedEx Ground.

    Federal Express Canada, the original presence here before the Caliber purchase, was also a purchase. FedEx bought the carrier they were using to deliver in Canada, a common practice. Consolidated Freightways did the same thing, twice, with Chris Transport (Canadian Freightways) and Hanson Transport (Canadian Freightways Eastern). Yellow did it too, though it had more to do with GM Oshawa at the time.

    Roadway grew into Canada, but pulled out after they purchased Reimer, who also agreed to withdraw from the US. Both carriers had a very small footprint on the opposite side of the border, and worked better together because each was nationwide at home.

    FedEx tried to buy Day & Ross. There are folks there who recall it. But Day & Ross is wholly owned by McCain Foods, who weren't interested in selling their in-house refrigerated carrier.

    So FedEx started looking at alternatives with presences in key markets in Canada. Namely Montreal, Toronto, Winnipeg, Calgary and Vancouver. They may have tried to purchase Manitoulin Transport, but it's a privately owned carrier and I happen to know that the Smith family isn't interested in selling.

    In fact, there are only a handful of carriers that service all of those cities. And FedEx wasn't about to buy the largely unionized LTL operation of TransForce. With Manitoulin and Day & Ross off the table, that excludes the 3 main carriers that service those areas.

    The only one left was Fairway Canadian Express, a largely regional operation that only owned a single terminal in Toronto, but leased space in terminals in key cities. Their largest customer, Watkins, beat FedEx to the punch.

    So FedEx takes a look at Watkins. A long haul LTL operation that was investing actively in their operation, with a network of terminals that already serviced Canada. Watkins also serviced areas FedEx didn't at the time. Buying Watkins, for FedEx, was a win-win situation. They got access to key Canadian markets, access to "every zip code in the lower 48 states" and a way to move cheaper freight. Why wouldn't they buy?

    But Watkins threw FedEx a catch. FedEx had to guarantee employment for those at the company for 5 years. This meant that FedEx could not merge Watkins into Freight, because that would undoubtedly cause layoffs. So they bought the company, rebranded it as National LTL and operated it largely intact. Most of the people who left were Watkins owner/operators because FedEx wasn't interested in them. City owners were given a choice, leave or sell and be hired. Most left. Linehaul had the option to stay, but under very strict contract guidelines that prevented them from obtaining bid runs. Once again, most left.

    It was National LTL that created the much-maligned rail freight system. And it was always FedEx's intention to merge National with Freight once the obligated 5 years was up. And they did, almost to the day, if not. From the perspective of people who worked at Watkins, they got screwed. From the perspective of FedEx, they got everything they wanted for less than it would've cost to do it themselves.

    Watkins wasn't SOLELY 100% for Canada, but that was a big part of it. They didn't need most of the US operation, but they did obtain things they needed out of that too. Looking at it from the broad scope perspective, FedEx isn't above wasting money to offer a service. Kinko's was a HUGE waste of money compared to Watkins. And they've never made the best use of C.J. Tower (FedEx Trade Networks) either. Most FedEx customers use Livingston International to broker freight, and some even use UPS.

    Trust me, Swamp, I'm not wrong. This massive post would have been required to dive further into the details beyond getting Canada, though I should've known you might challenge my more simplified statement because it wasn't 100% accurate.

    I was mostly just trying to avoid this massive post, because it took me about half an hour to write.
     
  17. Redracer3136

    Redracer3136 BANNED

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    Actually, I haven't "duped" anyone, especially our esteemed member from the north...he just sees things the same as most of the class, the truth in what actually occurred...and his post above is spot on!!
     
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  18. SwampRatt

    SwampRatt Well-Known Member

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    Dang CF, I didn't mean to insinuate that Canada wasn't a "piece" of the puzzle. Clearly it was, and was said to be at the time.

    I feel bad keeping this short, after your thorough account of the value of the Canadian access. I don't disagree. I only disagree with the theory of Watkins ONLY being purchased for that Canadian market at $780 million?

    Now, that does explain why they paid a PREMIUM for the whole enchilada.

    I've tried to find info on the value of the Canadian market, but that is tough to come by. Bureau of Transportation Statistics speaks in terms of truckloads, value of the goods, ect. Nothing pertinent to this conversation. Time prevents digging deep into Canadian Stats sources....

    Also, little detail is available on the Watkins numbers, as they were private. But... I must say based on the O/R numbers that I did find, the $780 million spent seems high. Really high, as the time to recoup that investment seems staggering, IMHO. That Canadian access provides some reasoning...

    Also of note, FedEx approached Watkins repeatedly, increasing the offer until they simply couldn't refuse.

    None of this explains away the fact that the management of, and subsequent merger, included a series of failures. Yes, merger (more accurately, consolidation) was likely a long term goal, but letting it "rot on the vine" was certainly not.
     
    Last edited: Mar 27, 2017
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  19. Canadian Flyer

    Canadian Flyer Speedy Freightshaker #411

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    They absolutely paid a lot of money for Watkins. But, as with Kinko's, it was an aspect of it's time. Yellow paid an astronomical amount for Roadway, and we all know how that's still going. It wasn't unusual for a company to throw money at an idea back then. The Recession changed a lot of that.

    National, as I mentioned, developed the intermodal service that is still in use today. FXNL remains the internal code for economy freight service, as well.

    But the merger, as with a great many mergers, was botched badly. As with the YRC merger, it disrupted things extensively.

    But yes, getting into Canada, particularly on the national scale, is difficult. As I mentioned previously, Consolidated Freightways had to make two purchases to accomplish just getting to Montreal, and that's as far as they got. And no one carrier offers truly nationwide service in Canada, with Day & Ross operating coast to coast but not to the far north and Manitoulin & TransForce not operating on the east coast.
     
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  20. Redracer3136

    Redracer3136 BANNED

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    This is where our discrepancy comes into play. As @Canadian Flyer has stated, there was a 5 year window where the company's hands were tied concerning consolidation, so making the best of that situation was kept to a minimum. There was no real effort made on the company's part to keep FXNL viable other than to integrate the rail service and to spend time training them to our systems/operations so they would be up to speed once the merger took place...5 years wouldn't be consider a "long term goal" IMO but the small efforts made showed they weren't left to "rot on the vine" either.

    I can easily see where some with FXNL would think failures were made but those are the ones who "thought" FXNL was going to be kept separate...and they would be correct if that were the case but it wasn't.
     

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