The precarious financial situation at North America's largest car hauler has put automakers on alert and has prompted dealers to develop backup plans.
Beset by rising fuel and labor costs, Allied Holdings Inc. has hemorrhaged cash and is slogging through a tough Chapter 11 reorganization.
Last week, facing a liquidation threat, it renegotiated $230 million in debtor-in-possession financing - debt incurred since it filed Chapter 11 in July 2005.
It also faces a possible confrontation with the Teamsters over a plan to cut wages.
47% of the market
Automakers say their top priority is to ensure delivery of vehicles to dealerships. Allied controls 47 percent of the vehicle-delivery market in North America.
General Motors, Ford Motor Co., the Chrysler group and Toyota Motor Corp. say they are keeping in close contact with Allied but wouldn't reveal contingency plans. Those companies, along with Honda Motor Co., accounted for about 88 percent of the hauler's delivery revenues in 2004, according to court papers. Allied declined comment last week.
Alan DeCarr, Toyota's group vice president for logistics, said in a statement e-mailed last week to Automotive News: "Allied Holdings has kept Toyota informed of their situation and has committed to do so going forward. Allied operations continue to remain normal for Toyota, and our expectation is for that to continue unless we are notified by Allied of any change."
Dealers say they would use alternative means to get vehicles if Allied's deliveries are interrupted.
Last strike was in 1995
The Teamsters last struck the car haulers in 1995, when they hit Ryder Automotive Group with a 32-day stoppage. Allied later acquired Ryder. A strike could be particularly harmful to import-brand dealerships, which tend to have smaller inventories than domestic-brand stores. The industry average for days supply was 70 days on April 1.
Ed Williamson, chairman of Williamson Cadillac-Hummer in Miami, says he would mobilize his staff to pick up the vehicles from the rail yard - an inconvenience because it's more than 80 miles away. He also would consider outsourcing the job to a local hauler.
No doubt, those surrogates would face an unsmiling welcoming committee from the Teamsters union."We certainly hope it doesn't happen, but we'd be able to scramble around and get through it," says Williamson, who uses Commercial Carriers Inc., an Allied subsidiary.
Brad Akins, owner of Akins Ford Corp. in Winder, Ga., says Allied shipment problems would create troubles getting F-series trucks. He also says he would go get vehicles, which would mean a 50-mile trip to Atlanta.
"Right now, as fragile as the industry is in certain areas, a distribution shutdown would be tough," he says.
Last week, in addition to renegotiating its debtor-in-possession financing, Allied secured an additional $5 million in loans after warning it could run out of working capital by May. The agreement runs through May 18.
But the hauler's temporary lifeline creates a possible Catch-22 scenario. Terms of the modified agreement compel Allied to seek a court order to cut its union wages and benefits by 10 percent- and the Teamsters have said they would consider a strike if the Bankruptcy Court judge says yes.
Allied filed the wage-cut motion this month, and a hearing has been scheduled for Wednesday, April 26.
You may e-mail Greg Migliore at [email protected]