The 73-year history of Consolidated Freightways abruptly ran out of pages on Labor Day, but it's not hard for some to imagine how many more chapters might have been written.

"This very easily could have been the story about a remarkable turnaround if the timing had worked out a little better," said Patrick Blake, the Vancouver-based trucking company's chief executive from May 2000 to May 2002.

As it happened, the story serves as a cautionary tale -- a corporate obituary that many saw in the making for years, even as CF faithfuls, such as Blake, never anticipated CF running out of gas.

Just months after replacing Blake, turnaround specialist John Brincko idled the major national trucker, announcing layoffs of 15,500 employees on Labor Day, then putting CF in bankruptcy.

"It was surprising to us, because the company had been around so long," said Danny Gibbs, a 12-year CF driver and dockman who was among about 970 laid-off workers in the Portland-area. "You would think that after 73 years, they would know how to manage their company."

But CF's collapse shows that no matter how secure a big company's future looks, it must aggressively update itself and manage its costs to dodge lethal blows from market changes. Even the stodgy trucking industry can change at a Silicon Valley clip.

Past executives, union members, consultants and customers said the company's leaders didn't respond nimbly enough to new customer demands, competitive threats and employee needs. They said CF executives also failed to invest in new technology, moved too late to cut CF's overhead and labor costs and ignored offers of help.

"They might have been good truckers . . . but they were not capable of running a $2 billion corporation," said Jim Schlueter, a former CF vice president.

Through the early 1980s, CF, then headquartered in Menlo Park, Calif., was on top of the world. With every truck that wheeled onto the highway, profits rolled into the pockets of CF shareholders.

"People would stand in line to work there," said Paul Eaton, 60, a 38-year employee.

It sold its Freightliner truck division, still a Portland-based company today, and used proceeds to start up Con-Way, one of the industry's most successful startups.

But even then, there were warning signs that changes in the business might challenge CF.

In market studies, consultant J.D. Powers found that the market for CF's primary business -- less-than-truckload shipping -- was shrinking, Schlueter recalled.

As a less-than-truckload carrier, CF consolidated cargo from multiple short-distance shippers on one trailer then routed it for the long haul through CF's hundreds of North American terminals.

A CF trailer loaded at Portland's dock bound for Phoenix might carry a box of toner cartridges from Tektronix in Beaverton, a 2,000-pound gazebo from Pacific Yurts in Cottage Grove and a 130-pound box of retail displays from Grand & Benedicts in Portland.

But studies showed fewer goods were moving long distances, meaning Portland businesses might be ordering less from New Jersey and more from Seattle.

The trends were alarming for CF and the other three major less-than-load carriers: Yellow Corp., Roadway Corp. and Arkansas Best Corp.

"It's like four gas stations on a corner," Schlueter said. "Sooner or later, one's got to go."

At the same time, deregulation enabled newer, nonunion carriers to underprice the big four.

"Since 1980, the freight business became very competitive," Blake said. "Anybody who could go out and get a mortgage on a truck became a competitor."

Roger Curry, CF's chief executive from 1997 to 2000, said nearly 50 trucking businesses predating deregulation have shut down.

"There is one commonality that all those 50 carriers had," Curry said. "That was their cost of labor. Each of them had Teamsters."

Another new pressure came in the 1990s, when big-box retailers and manufacturers began decentralizing their distribution systems -- to the benefit of smaller, regional carriers.

"The length of haul became shorter because each supplier was trying to get closer to his customers," Curry said.

Manufacturers began demanding "just-in-time" deliveries, meaning more frequent shipments of smaller quantities on tighter schedules. In response, the regionals began guaranteeing overnight service within 400 miles and two-day delivery on longer routes.

"All of a sudden, there was a new ballgame of expectancy being performed at a new level that I didn't think could exist," said Ray "Hap" Halloran, who retired in 1987 as executive vice president of marketing and sales but stayed until December 2001 as senior vice president emeritus.

"We didn't think it could continue," Halloran said.

Slow to react But it did, and so did the other challenging industry trends. Yet, observers said, CF managers did not change course with enough speed or precision.

"They didn't adjust fast enough," said Tom Jarvi, former vice president of maintenance, who retired in January after 31 years.

CF's distribution system wasn't suited for changes in customers' shipping patterns or inventory management, executives say.

The hub-and-spoke system required freight to be rehandled at one or more points, a costly setup that delayed delivery of cargo and made it susceptible to harm.

"Wherever there was a bold-lettered city on a map, there was a terminal there," Jarvi said. "The business couldn't support them."

To hold market share, observers said, CF priced its freight in a way that attracted too much light, bulky cargo, which generated less revenue than heavier, dense freight. It shipped too many boxes of store displays and too few drums of chain.

Some past executives and consultants said CF also relied too much on national accounts such as 3M or Home Depot. They said such accounts were heavily discounted but required a lot of staff time.

"They took on Home Depot knowing they would not make money from it but thinking that being a preferred carrier for Home Depot would lead to a lot of business with its suppliers, and it didn't," said Harvey Donaldson, a trucking expert at Georgia Institute of Technology.

"We were going for market share," said Glen Jewett, 79, CF's former director of line-haul operations until 1979. "We were discounting heavily to attain that. It obviously backfired."

The market-share emphasis came at the expense of a service focus at a time when service expectations were rising, Jewett said.

Eventually, CF took action on its terminal-system costs, reducing the number of terminals from about 700 in the early 1990s to less than 300 at the end.

"We narrowed our network just like every carrier," said Blake, the former CEO.

Jewett was invited back in December 1998 as a consultant on CF's problems. He found oodles. CF was underpricing freight, ignoring outstanding cost issues and damaging worker morale by paying dock managers less than dockworkers, he said.

"It was very obvious they were in deep trouble," Jewett said.

When his job ended in June 1999, he said he gave company executives a list of suggestions.

"They weren't interested," Jewett said. "I'm sure they went in the wastebasket."

Compounding problems As operational problems mounted, two corporate-structure moves undermined CF's confidence, observers said.

In 1996, Consolidated Freightways Inc., founded in 1929 in Portland, cast off its bread-and-butter namesake, Consolidated Freightways Corp., leaving the new company nearly debt-free.

The ex-parent kept its nonunion regional trucker and air freight division, Emery, and renamed itself CNF Transportation. Now known as CNF, the former parent, based in Palo Alto, Calif., is doing well.

But the spin-off was the beginning of the end for CF, many say. CF drove through cash, allowed its truck fleet and technology to age and watched its workers' once-swollen pride plummet.

The move created a self-fulfilling prophecy of failure, said Georgia Tech's Donaldson, who studied CF in late 2001 for a potential investor.

"CNF spun them off by saying, 'We believe the other companies are healthier and will grow faster than a Teamster company like Consolidated Freightways,' " he said. "It became an underlying culture of doubt as to their worth and sustainability."

Another blow to CF's self-esteem came in 1999.

In a year in which CF's cash reserves plunged from $123 million to $49.1 million, CF executives approached counterparts at Yellow with a stunning offer: CF wanted to buy the competitor.

But within weeks, former executives recall, Yellow came back with a more surprising reply: Yellow wanted to buy CF.

Ultimately, talks collapsed -- but not before word had leaked out, ravaging CF's rank and file. Yellow drivers teased CF drivers, who took immense pride in their company's red-and-green logo.

"The morale cratered, and never returned," said Curry, the CEO at the time. "The people never got through it. The people felt that they had somehow been betrayed."

Morale crisis

CF's internal culture -- and faith in management to update it -- didn't help, observers said.

A 1999 consultant's report obtained by The Oregonian told a story of wounded pride.

An employee focus group study by Towers Perrin in September 1999 found nonunion employees felt overworked and underpaid, compared with union counterparts. They also felt unheard.

CF's "top-down" communication style lacked substance, workers said, and high turnover was a big issue. "People feel they are not listened to and that there is an unwillingness to change within the management and executive management ranks," the report stated.

An accompanying survey of CF's top 10 executives and directors called for change from a "command and control" style to a more decentralized approach that put more trust in employees while holding them accountable.

"At one time, if you didn't perform, you were gone," said Jarvi, the former maintenance VP. "I didn't see that as much in recent years. That's all we heard: 'A lot of accountability.' But where was it?"

Jim Suhrstedt, who quit CF in July after 13 years, said on his last sleeper-team runs, he heard dockworkers complaining in Akron, Ohio; Chicago; Dallas, Texas; Memphis, Tenn.; and Kansas City, Mo.

"Morale was terrible," said Suhrstedt, now living in Roseburg. "You'd just sit in the break room and listen to them. They had no confidence that management could do anything to change it."

A new chief executive After profits slimmed to $2.71 million in 1999, CF's board launched a national search to replace Curry, who retired in January 2000.

But the board settled on one of CF's own, an operations expert who had driven an unlikely route to the top. Patrick Blake had started with the company as a Teamster, working CF's dock in Portland before climbing to president and chief operating officer.

Shortly after taking charge in May 2000, he moved CF's headquarters to Vancouver, not far from where most of its administrative employees worked in Northwest Portland.

Colleagues described Blake as a workaholic and respected trucker.

As an executive vice president, Blake sometimes had slept on a cot in the headquarters' basement, recalled Dave Benak, CF's director of training for 30 years. Blake called 4 a.m. meetings with top managers to discuss the day's operations.

Benak and other company directors cringed when Blake, as CEO, involved himself in morning operational conference calls with terminal and division managers nationwide, demanding to know why a single shipment hadn't reached its destination on time.

By the time Blake became chief executive, CF was almost midway through a year producing $7.57 million in losses.

"He should've been working on a five-year plan . . . leading, showing direction, showing vision, trusting people," Benak said.

Benak retired last summer after declining a position as vice president of human resources because, he said, he didn't want to take direction from CF's top managers.

"The senior guys who really were the problem didn't know what the problem was," Schlueter said. "The Pat Blakes of the world were just not capable of running that company."

Said Halloran of Blake's team: "They were tending the creek, instead of the Coolie Dam. If you have people working for you, you've got to have faith in them."

Blake called such criticisms "baloney." He said he brought in consultants to develop long-term plans to improve CF's customer mix and cut costs. But crises such as the Sept. 11 terror attacks impeded progress.

"When you're fighting day-to-day battles in the economy that developed as the dot-com world collapsed and then 9/11, it was very tough to get past the day-to-day," Blake said.

"But we never wavered," he said. "We assembled a professional team to support the engineered approach to taking costs out of the company."

Some former managers said Blake did what he could in light of challenges to union carriers.

"I saw Pat Blake as a hero," said Bill Schwartz, a 23-year employee who worked his way up to national sales executive before leaving in January 2001. "The real story in all of this is what's happened to the unionized carriers. They've all become dinosaurs."

Blake, too, rejected offers of help, said Benak, the former training director, and others.

A Teamster spokesman in Washington, D.C., said its freight division director, Phil Young, repeatedly offered to meet with CF executives to offer aid in bandaging the bleeding bottom line.

Blake rebuffed the union, said Bret Caldwell, the spokesman. Only with Brincko, the turnaround specialist, did the union get an audience with a CF chief executive, Caldwell said.

Blake said one of his top executives, Tom Paulsen, met with the Teamsters.

"We kept them apprised of where we were at," Blake said.

Damaged freight By 2000, CF's unaddressed service problems and outdated technology were hurting the carrier, observers said.

"As the company was working to improve itself, it got caught short, especially on the insurance side," Blake said.

Customer claims and insurance expenses shot up 12.5 percent from 1999, partly because of a rise in damaged cargo, even though CF's tonnage had declined, according to its annual report.

John Graham, president of Gladstone's Rigger Services, said CF had a history of late deliveries. Rigger provided the kind of business CF most wanted: heavy chains and fittings, prepackaged and palatized, that were easy to move around CF's docks and trucks. Although CF's delivery times recently had improved, Graham said, CF had delivered more damaged containers during the past five years.

"You have seen no problem like that of a broken drum of chain," he said. "It's a mess. Unfortunately, five of the last six shipments have arrived in this condition."

At the same time, Blake's regime grappled with problems from years of underinvestment in technology, observers said. CF's technologies -- from its computer systems to trucking equipment -- were years behind competitors,' and its rare upgrades sometimes backfired.

After the split with CNF, CF bought a PeopleSoft computer system to perform administrative services such as payroll. The system caused CF often to pay its drivers incorrectly, prompting costly repairs while hurting morale, said Darrel Overbeck, 63, a payroll specialist who retired in 1999 after 38 years with CF.

"That cost them bucks," he said.

Another tech problem stemmed from the CNF spin-off, Blake said.

"Our parent company owned the mainframe computer box," he said. "While we had access to the programs, we didn't have access to the intellectual capital during that tough Y2K time."

From CF's truck fleet to its computers, every technology showed signs of a decade of top managers' neglect, said Donaldson, the Georgia Tech expert.

"They were trying to improve operations just through tougher management and telling people to work harder rather than investment in technology," he said.

Service and technology problems helped sap CF's financial health. In 2001, its debt-to-assets ratio -- a measure of its financial standing -- skyrocketed to 11.24, up from 1.63 in 2000.

Buying time Blake stepped aside in May to make way for a leader more suited for managing CF's crisis. CF had suffered six consecutive quarters of losses, while its competitors remained largely profitable. The board chose nationally renowned turnaround specialist John Brincko.

With debt mounting, CF's fate was in creditors' hands. A turnaround expert such as Brincko was the best bet for restoring their faith enough to hold them at bay.

"I thought the company needed time," Blake said.

Brincko's top priority was rebuilding profitability. Bankruptcy "was not a consideration," he said.

In July, Brincko's turnaround team asked the Teamsters leadership to consider a 12.5 percent wage cut. In reviewing the CF's books, Teamsters' officials determined that a wage cut might be warranted and set a date for a vote. But CF sought a delay, later spiking the proposal.

By August, the company clearly was struggling. CF told the Securities and Exchange Commission that it could not file its second-quarter report on time. The Nasdaq stock market threatened to delist CF stock.

In the last week of the month, signs of a shutdown spread. CF cancelled its Thursday and Friday cross-country sleeper-team trips. Dispatchers radioed all long-haul trucks still on the road to return to their home terminals by Sept. 1.

On that day, a Sunday, Brincko secretly signed the company's bankruptcy petition. On Labor Day, the company shut down. The next day, CF filed for bankruptcy.

"It's something you always avoid at the last possible moment," Brincko said. "In a very, very changing environment, something can happen very quickly."

In this case, a CF bondholder's decision to cancel CF's workers' compensation and vehicle casualty insurance precipitated the bankruptcy filing, according to a quarterly report released the day of the bankruptcy filing. The move left CF stock worthless.

Now, as Brincko and what's left of CF scramble to sell company assets and wind down operations, truckers, dockworkers and office staffers are searching for jobs.

For them, Teamster spokesman Caldwell said, Brincko "was brought in too late to make the changes necessary to survive."

Oregon Live

-- Anonymous, September 15, 2002

Answers

Insurance woes may have pushed CF over the edge

The $2.2 billion company pulled the plug on operations Sept. 2 and filed for Chapter 11 bankruptcy Sept. 3. At the time, CF stated it lost workers' compensation and vehicular casualty insurance coverage, something that "negatively impacted discussions with all lenders and investors. ... Moreover, the company anticipated that a second insurer would also cancel coverage."

Following Vancouver, Wash.-based CF's filing, company executives have answered questions about what led to the company's unexpectedly swift shut-down. An aspect that has received very little scrutiny is the role that insurance played in the downfall of CF.

An industry observer thinks the loss of insurance put the company into an uncontrollable downward spiral. Effectively, the loss of insurance coverage likely meant regulatory agencies would have shut down the company, which one year ago employed about 18,000 people throughout North America.

"If a carrier doesn't have that coverage, they don't have 'operating authority' and without that, the Department of Transportation will shut them down," said Richard Curtis, who heads the national accounting and finance council of the American Trucking Associations. "That would be the nail in the coffin."

Oregon Live

-- Anonymous, September 23, 2002