DETROIT -- Beset by higher fuel prices and lower auto production by domestic carmakers, North America's two largest vehicle transporters are now in bankruptcy court.
Vehicle transporter Performance Transportation Services Inc. last week filed for Chapter 11 reorganization in U.S. Bankruptcy Court in Buffalo, N.Y. The company, which delivers vehicles from distribution points to dealerships, is the second-largest transporter in North America.
Allied Systems, of Decatur, Ga., the largest shipper in North America, filed for Chapter 11 reorganization last July.
Jeffrey Cornish, CEO of Performance Transportation Services, told Automotive News the Chapter 11 filing won't disrupt deliveries. The company ships about 3.3 million new vehicles annually. Allied ships about 9 million vehicles annually.
Cornish said the Wayne, Mich., company's largest customer is Ford Motor Co., which accounts for about 40 percent of its business. General Motors accounts for about 20 percent. Other customers include most automakers that have assembly plants in North America.
The trucker hopes to emerge from Chapter 11 quickly, but Cornish wouldn't give a timetable. He said the company is working on a plan to cut labor costs, obtain price increases, attract new business and reduce inefficiencies.
"We think it's better to emerge sooner than to have it drag on," he said.
The number of bankruptcies in the U.S. auto industry is rising, but mostly has been limited to the parts sector.
Performance Transportation Services has fresh credit lines to continue operating during reorganization. But a bankruptcy case can raise concerns from customers about products reaching their destination. Companies seeking to cut labor costs in bankruptcy court run the risk of provoking union protests.
The Teamsters represent many of the company's 2,100 employees.
"As the reorganization moves forward, we will make sure our members' voices are heard loud and clear - whether it be in the courtroom or corporate boardroom," Teamsters President James Hoffa said in a statement. "We will do whatever it takes to hold executives and managers accountable."
Cornish said the company has not entertained selling parts of the company and hasn't been approached by an outside buyer.
Performance Transportation Services has three main business lines: E&L Transport, Hadley Auto Transport and Leaseway Motorcar Transport.The reorganization petition does not apply to subsidiaries outside of the United States.
The company was formed in 1999 by a group of private investors led by Onex Corp. and Hidden Creek Industries. Penske Truck Leasing LP now owns 39.9 percent of the stock.
The company generated $343 million in revenue in 2004 and expected to post about $331 million in revenue for 2005. It has lost between $1.3 million and $7.2 million a quarter for the last few years, according to bankruptcy court documents.
Allied says it does business with all major automakers with plants in the United States and Canada.
You may e-mail Philip Nussel at [email protected]