Motor Cargo Industries, Inc.

views updated

Motor Cargo Industries, Inc.

845 West Center Street
North Salt Lake, Utah 84054
U.S.A.
Telephone: (801) 292-1111
Fax: (801) 296-5317
Web site: http://www.motorcargo.com

Public Company
Incorporated: 1954 as Barton Truck Line, Inc.
Employees: 1,738
Sales: $125.3 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: CRGO
NAIC: 48411 General Freight Trucking, Local; 484122 General Freight Trucking, Long-Distance, Less Than Truckload

Motor Cargo Industries, Inc. is one of the largest regional LTL (less than truckload) trucking and logistics companies that serves customers mainly in ten western states. Its modern fleet of more than 620 tractors and 2,300 trailers provides both dry and refrigerated delivery of food, electronics, clothing, hard-ware, auto parts, other consumer merchandise, and industrial items. Through its wholly owned subsidiary MC Distribution Services, Motor Cargo offers flexible warehousing and distribution management services. It operates six logistics/warehousing facilities where customers’ items can be consolidated to save trailer space and thus reduce shipping costs. Motor Cargo is often cited for using the latest information technology to keep track of its operations and finances, a crucial factor in providing the fastest delivery times possible. Through agreements with other trucking companies, Motor Cargo moves items all over the nation as well as Canada and Mexico.

The Early Years

In 1922 the Barton family started a small firm called the Barton Truck Line in Tooele, Utah, a small town about 25 miles west of Salt Lake City. With its original two trucks, the company remained a modest operation as Utah did not enjoy the prosperity most of the nation enjoyed in the roaring twenties. The worsening depression of the 1930s prevented any significant growth of the Barton Truck Line.

Once the nation entered World War II, the depression ended as the government and the private sector expanded to meet the new demands. During World War II, the military established ten bases and an army hospital in Utah, including some near Tooele and the rest within about an hour’s drive. At that time, most of the Barton Truck Line’s routes were between Tooele and Ogden defense facilities. In or near Ogden were 1) the Ogden Arsenal, the main depot for supplying ordnance and equipment to the western states after 1943, 2) the Utah General Depot, the nation’s largest quartermaster depot after its construction in 1941, 3) Ogden Air Depot, later named Hill Air Force Base, the state’s largest employer by 1943, 4) the Clearfield Naval Supply Depot, and 5) the Bushnell Military Hospital in nearby Brigham City. The Tooele Army Depot, completed in 1943, and the Dug way Proving Ground, used to test chemical weapons, were close to the Barton Truck Line’s home base.

New Ownership and Expansion After World War II

In 1947 the Barton family sold its partnership to William C. Tate and his son Harold R. Tate. The father had been born and raised in Tooele, Utah and had worked for 20 years on the Tooele Valley Railroad and owned two other small businesses before purchasing the Barton Truck Line.

According to the Utah Division of Corporations, Barton Truck Line, Inc. was incorporated in 1954, with William C. Tate as its president, general manager, and a director. His wife Vera M. Tate was the vice-president and a director, and his son Harold R. Tate was the secretary-treasurer and a director. William C. Tate and Harold R. Tate transferred control of a Peterbilt tractor and two Brown trailers worth $30,000 to the new corporation, in exchange for the father holding about two-thirds and his son one-third of the company’s stock.

During the 1950s and early 1960s, the firm continued ship-ping to and from Tooele and Salt Lake City and Ogden and also expanded to Logan on the northern borders of Utah. In the mid-1960s the company started shipping to Wells, Nevada, its first interstate route. William C. Tate in 1966 moved to Salt Lake City to be closer to his growing company’s main terminal. Then in 1972 he retired and turned over the business to his son Harold Tate, the new president of Barton Truck Line, Inc.

A turning point came on March 19, 1973 when Barton Truck Line, Inc. merged with Bonanza Trucking Company, a unanimous decision by the shareholders of both firms that left Barton as the surviving corporation. Bonanza had been incorporated in Utah in 1959, with Harold R. Tate as its president. In 1968 Bonanza had merged with Colorado Freightways, Inc., incorporated in Nebraska with its general offices in Denver, Colorado. Bonanza in 1968 was the surviving corporation headed by Denver’s George R. Cannon, its president, treasurer, and a director.

With the acquisition of Bonanza, Barton became a regional trucking firm with new shipments to and from Utah, Denver, and Los Angeles. In June 1973, just a few months after Barton acquired Bonanza, it changed its name to Motor Cargo, according to the Utah Division of Corporations.

The Trucking Deregulation Era Since 1980

In 1980 the federal government ended its regulation of most interstate trucking. The increased competition that resulted led to the demise of many trucking companies. Motor Cargo survived at least in part by not reducing its rates so far that they could not make a profit, a mistake some competitors made.

Motor Cargo in the 1980s and early 1990s expanded its business with new routes and facilities. For example, in 1981 it opened new service facilities in Tucson and Phoenix, and the following year began shipping to the San Francisco Bay area. Direct routes into the Albuquerque area were increased in 1984, and the company service center in El Paso was established in 1986. In 1991 Motor Cargo opened terminals in Portland, Seattle, and Medford, Oregon.

In 1991 Motor Cargo chose Lou Holdener, its vice-president of operations since 1984, to be its new president, while Harold R. Tate remained chief executive officer and chairman of the 750-employee firm. In October 1993 the company reported an on-time delivery performance of 98.7 percent, the highest in the western United States. It achieved that level through two-driver sleeper teams that allowed nonstop transportation and direct routes that avoided most satellite terminals and hub-and-spoke systems that hampered other carriers. From 1989 through 1993 Motor Cargo’s accident rate consistently was less than the national average. At the same time its revenues increased steadily from $49.1 million in 1989 to $68.7 million in 1993, while the company remained profitable with 1993 net earnings from operations of $5.2 million.

In 1994 Motor Cargo trucks delivered materials among ten states: Washington, Oregon, Idaho, California, Nevada, Idaho, Utah, Colorado, Arizona, and western Texas; the firm also provided intrastate shipping within Arizona, California, Utah, and Nevada. A partnership with Reimer Express provided service throughout Canada. Motor Cargo operated more than 35 service centers from Seattle in the north to El Paso on the Mexican border.

Effective January 1, 1995, a new federal law prohibited states and local governments from regulating prices, routes, and services of intrastate trucking, with the exception of carriers of household items. “The industry has operated with regulation for over 60 years, and now it’s a completely new playing field,” said Dave Titus of the California Trucking Association in the November 7, 1994 National Review.

Thus the deregulation started in 1980 during the Carter administration was completed. The impact was evident from the increased number of trucking entities. U.S. News & World Report on September 18, 1995 stated that the number of licensed interstate truckers had increased from 17,000 in 1980 to more than 60,000.

On January 1, 1996 Motor Cargo Industries, Inc. was incorporated in Utah with Marshall Tate as its president and a director. Harold R. Tate and Marvin Freidland were the other two directors. Marshall Tate, Harold R. Tate’s son, represented the family’s third generation to lead Motor Cargo.

Just a few months later, in July 1996, Arnold Industries Inc. based in Lebanon, Pennsylvania, announced that it planned to purchase the Utah company. In February 1997, however, Arnold decided not to buy Motor Cargo, stating in the Lancaster New Era, “Details of the proposed acquisition proved complex and could not be resolved within a reasonable timeframe.”

Motor Cargo experienced few union problems in the 1990s. For example, Teamsters briefly picketed the company but did not disrupt company operations. The company in Utah was not unionized because of the state’s right-to-work law.

Key Dates:

1922:: Barton Truck Line is started in Tooele, Utah.
1947:: Tate family purchases the partnership.
1954:: Barton Truck Line, Inc. is incorporated.
1960s:: First interstate shipping is started—to Wells, Nevada.
1973:: Barton purchases Bonanza Truck Lines and changes its name to Motor Cargo.
1970s:: Shipping to the Los Angeles area is started.
1977:: Firm purchases R&R Transportation of Reno and begins intrastate Nevada service.
1981:: Begins routes to Phoenix and Tucson.
1982:: Deliveries are started to the San Francisco Bay area.
1986:: The El Paso Service Center is opened.
1997:: The company’s IPO is completed.
1998:: The firm acquires Las Vegas/LA Express, Inc.
1999:: Motor Cargo closes its Chicago office.

In the 1990s regional carriers like Motor Cargo were forced to upgrade their information technology systems by national carriers that had more resources to invest in high-tech systems. “If a carrier can’t do business electronically, it can’t do business with many industries,” said Rita Moore of American Freightways in the April 1999 Logistics Management and Distribution Report. “Retail is a prime example.”

Keeping track of shipments was much easier with electronic systems. Bill Mahan, Motor Cargo’s chief operating officer, said in 1999, “We beefed up our call center and added client-specific data to our shipment information. Customers may re-quest information based on a pro number, shipment number, bill-of-lading number, a shipment date, or other information.”

Motor Cargo also shared with its customers a cost-modeling computer program that tracked shipment data such as density, weight, origin, and destination. Such computer programs lowered costs for both the shipper and carrier. For example, Motor Cargo might consolidate shipments from two companies to one destination by using just one trailer instead of two.

Motor Cargo personnel used the latest technology, including cellular phones used by all of its line drivers, satellite-based global positioning systems (GPS), and laptop computers. The bottom line was that investments in computers and advanced telecommunications were necessary to survive in the deregulated trucking industry.

In May 1998 Motor Cargo announced that its subsidiary MC Distribution Services was acquiring the operating assets of Las Vegas/LA Express, Inc. (LVLAX). A Pomona, California firm with $4.8 million in revenues at the end of the fiscal year ending September 30, 1997, LVLAX focused on providing mainly retail operations with assembly, segregation, and distribution services. Motor Cargo President Marshall Tate in a May 28, 1998 PR Newswire stated, “The addition of LVLAX to MCDS provides us with a stronger client base, an enhanced distribution infrastructure, and a dedicated and talented management team. Further, it represents an important first step in implementing MCDS’s strategic growth plan.”

Motor Cargo also announced in 1998 that Starbucks Coffee Company had awarded a three-year contract to MC Distribution Services for logistics management services for Starbucks’ new stores under construction worldwide. Previously MC Distribution Services served Starbucks in the western United States and the Pacific Rim. Other Motor Cargo customers in the 1990s included 3M Company, NCR Corporation, Sharp Electronics Corporation, Steelcase, Sony, Moen, Pepperidge Farms, American Honda Motor Corporation, Digital Equipment, Kinney Footlocker, Hills Brothers Coffee, and Best Products.

In June 1999 Motor Cargo opened a 120-door terminal in Phoenix, Arizona. In December 1999 the company announced that it had opened a new Reno, Nevada facility that it owned and shut down a leased facility in the same city. The new 50,000-square-foot Reno terminal featured 84 dock doors and modern maintenance capabilities.

“The Nevada market has contributed greatly to our Company’s success over the last 50 years,” said Motor Cargo Industries President/CEO Marshall Tate in a December 21, 1999 PR Newswire. “We operate more facilities in Nevada and serve more of the state’s population than any other carrier.” Motor Cargo’s growth in Nevada was due in part to that state’s booming population. In December 1999 the U.S. Census Bureau reported that Nevada was the nation’s fastest growing state for the fourteenth year in a row. Its population had increased 51 percent since 1990.

With its headquarters in North Salt Lake, a municipality just north of Salt Lake City, Motor Cargo was well positioned geo-graphically to take advantage of free trade agreements between Canada, the United States, and Mexico. Although Canada and the United States historically enjoyed close trade relations, in 1989 they approved the Canada-United States Free Trade Agreement to reduce any barriers to trade. Then the U.S. Senate in 1994 ratified the North American Free Trade Agreement (NAFTA), which lowered barriers between Canada, Mexico, and the United States. “Trade between Canada and Mexico has increased tremendously since NAFTA,” said Richard Krott of The Rocky Mountain Trade Corridor in the December 27, 1998 Salt Lake Tribune. Located in the so-called Canadian-Mexican trade corridor, Motor Cargo reported that its shipping had increased mainly to Canada, which annually bought more than $400 million in goods and services from Utah, but also to Mexico, which bought more than $70 million annually from Utah.

Motor Cargo had agreements with other truckers that allowed them to transport their customers’ merchandise anywhere they desired. For example, one of its strategic partners was Columbia, South Carolina-based Southeastern Freight Lines, which shipped items in the southeast and southwest.

In 1999 and 2000 the entire trucking industry suffered under rising gasoline prices. Prices for regular unleaded gasoline in Utah rose 40 to 50 cents per gallon in 1999 and by the end of February 2000 averaged about $1.51 per gallon statewide. California fuel prices were even higher. According to Motor Cargo President Marshall Tate, fuel accounted for five to six percent of his company’s costs. Although Motor Cargo passed some of those costs on to its customers, the firm also absorbed part of the increased fuel costs.

The company recorded 1998 revenues of $114.7 million, an increase of 8.8 percent over its 1997 revenues of $105.4 million. Its net earnings also increased, from $5.6 million in 1997 to $5.8 million in 1998. The year 1999 brought mixed results, with revenues increasing 9.2 percent to $125.3 million, but Motor Cargo’s net earnings decreased 19.6 percent to $4.7 million.

After becoming a public corporation in November 1997, Motor Cargo’s stock declined from an initial $12 per share to less than $5 per share in late 1999 and remained less than $5 per share in the first four months of 2000. The company’s less-than-truckload segment of the trucking industry was a difficult place to make money for it had just a two or three percent annual increase, whereas long-haul carriers enjoyed a five to six percent increase in their segment.

In 1999 Motor Cargo closed its Chicago division, which it had opened in 1998 to gain new customers who wanted items shipped to the western states. President Marshall Tate said the Chicago operation was not profitable, so it was shut down. He emphasized, however, that Chicago was just one of 56 divisions, so its closure was merely a minor setback.

Although Motor Cargo remained a profitable business, it faced numerous challenges in 2000. Stiff competition, rising fuel prices, low stock prices, and increased expectations for speedy delivery in the fast-paced Information Age gave Motor Cargo officials plenty of obstacles to overcome.