A Closer Look at the Recent Celadon Closure

The shocking and sudden bankruptcy of Celadon is the largest trucking failure to date. Nearly 4,000 employees abruptly found themselves out of work one Sunday night, when a message was suddenly sent out to their telematics devices. With very few details, drivers had to figure out what to do with their rigs and how to get back home. 

A lot of industry players were absolutely shocked by the recent Celadon closure. But what does it actually mean for the trucking industry as a whole? 

About Celadon 

Stephen Russell founded Celadon, an Indianapolis-based trucking company, in 1985. Steve was a knowledgeable former executive with Ford, RCA, and Hertz Truck and equipment. Celadon became one of the first US companies to create routes into Mexico, which opened up a significant trade route for North America. 

Since its founding, Celadon had been one of the biggest truckload carriers in North America. It hosted a fleet of nearly 3,300 tractors and 10,000 trailers. Their clients included major corporations like Walmart, Honda Motor, Procter and Gamble, and Philip Morris International. Since 2015, they’ve brought in more than $1 billion in revenue. 

What Happened? 

Celadon filed for Chapter 11 protection, essentially declaring bankruptcy. This forced them to halt operations almost instantaneously. Over 3,000 drivers were suddenly jobless, and many drivers were actually stranded mid-route. 

Drivers were laid off, and they had to figure out what to do with their rigs and how to get home. There was a lot of conflicting information about what they should do, and a lot had no way of getting homes. Their fuel cards were shut off, so they couldn’t fill tanks, and truck stops were refusing assistance because the company’s maintenance account was closed down. 

Other trucking companies saw the trouble with this. They encouraged their drivers to help Celadon workers however they needed—especially since this was happening during the holiday season. 

What Caused the Failure? 

The trucking industry has seen a lot of roadblocks in recent years. From a driver and truck shortage to increased regulations and costs, it’s harder for carriers to stay in business. 

That’s only a piece of the puzzle, though. Celadon also recently went through a massive accounting scandal, which reportedly lost shareholders over $60 million. Two of Celadon’s former executives were charged with securities fraud. This hurled the company into a downward spiral of debt. Celadon found it was too hard to recover the lost funds, especially with the shrinking margins of the trucking industry. 

Along with the fraud itself, Celadon had significant costs from the years of investigations and legal consequences. They were continuously trying to restructure and reallocate assets, but the numbers weren’t working out.  

Will Other Trucking Companies Follow Suit? 

We don’t predict that this is the “end” of major trucking companies. It won’t be the first domino in a series of downfalls. Although Celadon was feeling the pressure of industry shifts, fraud and debt were their ultimate downfall. 

Still, there are a lot of trucking companies that have been struggling this year. Celadon’s the biggest player to fall, but they’re not alone. In 2019, nearly 800 carriers went out of business, which is about double the trucking failures from 2018. 

It’s a tough year for the industry overall. But the Celadon closure seems only partially to do with the industry and much more to do with the accounting fraud. 

What Does the Celadon Closure Mean for the Industry? 

There’s a shortage of U.S. truckers. Over 50,000 drivers are needed for big companies like Amazon and Walmart as these giants are fighting one another to win the shipping war. 

So Celadon’s loss might be the gain of rival carriers, who are looking for drivers. A lot of companies are planning to match or exceed their pay packages with sign-on bonuses. A few of them are even offering free bus tickets and legal counsel to stranded Celadon drivers. 

As for the industry, it has hit a low, for sure. But we fully believe 2020 is going to bring us back to some sort of equilibrium. Of course, that doesn't come without a lot of changes—and some organizational failures along the way.

Celadon’s Comeback

Despite the Celadon closure, they’re looking to restructure and bring Celadon’s operations back. They had trouble as they moved into debt, but they might be able to reorganize and revamp after the bankruptcy. 

If they do come back, they’re going to need to re-hire and prove their worth. And that usually comes with immense upfront costs. They have a major barrier to re-entry, so we anticipate it will be an uphill battle for this trucking giant. 

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