Trucking firm Con-way reduces profit outlook, jobs

Con-way executives said declining volumes in the less-than-truckload market, pressure on pricing and lower fuel surcharges had combined over the past two months to reduce the outlook for fourth-quarter and full-year profit.

The Associated Press

12/9/2008

SAN MATEO, Calif. — Trucking operator Con-way Inc. on Monday cut its forecast of 2008 profit by about 15 percent and said it cut about 1,450 jobs, or 8 percent of its work force last week, as it struggled with a slowing economy that has reduced demand for shipping goods.

Con-way said it expects earnings from continuing operations between $2.20 and $2.35 per share, down from its previous forecast of $2.60 to $2.80 per share.

Analysts surveyed by Thomson Reuters forecast annual earnings per share of $2.79, on average.

The reduced earnings forecast excluded charges of about $7.5 million that the company expects to take in the fourth quarter to cover severance payments. The company also expects to take a fourth-quarter charge of $30 million to $35 million to write down the value of a Chinese transportation company it bought last year.

Executives said Con-way was keeping a wide range in its guidance because of an uncertain economy that continues to deteriorate.

They said declining volumes in the less-than-truckload market, pressure on pricing and lower fuel surcharges had combined over the past two months to reduce the outlook for fourth-quarter and full-year profit.

“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,” said John G. Labrie, president of the company’s freight unit.

Executives said the sharper decline in shipments since they last briefed investors two weeks ago led to the job cuts on Friday.

The San Mateo-based company said the job cuts were in line with lower volumes shipped -- off 3.8 percent in October and 9.2 percent in November from the year before.

The jobs cuts were spread across most of the company’s 303 locations in North America, it said, including 78 staff positions at Con-way Freight’s Ann Arbor, Mich., general office, and 60 positions at an administrative center in Texas.

The $7.5 million estimated charge for severance payments comes on top of a fourth-quarter charge of $20 million that the company had already announced for costs related to consolidation of 40 service centers. That move resulted in the loss about 400 jobs.

Taken together, the job cuts are expected to save the company more than $40 million a year in lower payroll costs.

Labrie said volumes are running at about 2003 levels, when the company had 17,500 workers.

“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,” he said.

The charge of $30 million to $35 million will cover a write-down in value of Con-way’s investment in Chinese transportation company Chic Holdings Ltd. A Con-way subsidiary bought Chic Holdings last year for $60 million.

The company is scheduled to report fourth-quarter and full-year financial results on Jan. 26.