Con-way Freight on Monday, Dec. 8, announced a reduction in its nationwide work force by about 8 percent, or about 1,450 positions. Con-way Inc. says that since its investor conference call on Oct. 23, the decline in year-over-year tonnage at Con-way Freight has accelerated significantly as the economy has continued to deteriorate. The company says the reduction is in line with lower tonnage volumes that were down 3.8 percent in October and 9.2 percent in November, respectively, from last year’s levels.
The company says the work force reductions, which occurred on Friday, Dec. 5, were spread across most of its 303 operating locations in North America; they included the elimination of 78 staff positions at Con-way Freight’s general office in Ann Arbor, Mich.; 60 positions at an administrative center in Texas; and a realignment of its area and regional division structure to streamline management. The company says the work force reductions will result in an estimated fourth-quarter charge to earnings of about $7.5 million, primarily for severance and other payroll-related expenses.
The charge for the work force reduction is in addition to an earlier-disclosed fourth-quarter charge of $20 million for costs associated with Con-way Freight’s network re-engineering initiative. The company says this initiative, which enabled service improvements and more efficient network operations through consolidation of 40 service centers, resulted in a net work force reduction of about 400 positions. The re-engineering initiative was completed successfully last month without reducing service levels or market coverage, the company says.
As a result of the Dec. 5 work force reductions and November’s network re-engineering initiative, Con-way Freight expects to realize annualized cost savings in excess of $40 million.
Commenting on the Dec. 5 work force reduction, John G. Labrie, president of Con-way Freight, noted that with U.S. manufacturing activity at its weakest levels in 26 years, and consumers continuing to restrain retail purchasing, the effect on freight volumes has been dramatic. “The declines in shipping activity, which we first saw at the end of the third quarter, steepened in October and November, and are continuing in December,” Labrie says.
“Comparable business volumes are now at roughly 2003 levels, when we had a work force of about 17,500 employees,” he says. “While decisions to eliminate jobs are exceedingly difficult, these are steps we must take given an unprecedented economic downturn that affects not only our company, but the entire industry and our customers. Faced with these business conditions, we have no choice but to rationalize our cost structure, realign staffing for current volumes and properly position Con-way Freight to execute our strategy, which is focused on delivering customer and shareholder advantage.”
According to the company, individuals subject to reduction in force are being offered a separation package that includes severance pay, a lump-sum payment intended to assist with incidental costs, and a payment equal to the annual yearend bonus for which a separated employee would have been eligible on Dec. 31.
Con-way Inc. says its other two principal business units, Menlo Worldwide and Con-way Truckload, have instituted expense-curtailment initiatives specific to their companies. In addition, Con-way’s corporate group and enterprise shared-services operations in Portland, Ore., have reduced staffing by 88 positions.