Jack Cooper Transport

The Kansas City Star

By Randolph Heaster

After a Brutal 2009, Auto Industry Supplies Are Increasingly Optimistic

February 22, 2010

Last May, the apocalypse appeared to loom over the entire U.S. auto industry.

With Chrysler in bankruptcy and General Motors about to follow suit, industry experts wondered whether the total collapse of either automaker would start a domino effect with the industry's suppliers.

Many suppliers — including those with area plants, making everything from seats to consoles to bumpers — were in the same dire financial straits as two of the Detroit Three. They also faced the prospect of no cash coming in as GM and Chrysler planned to idle most of their plants for June and July. Industry consolidation and shutdowns were eliminating thousands of jobs.

"We had our job cut out for us, to say the least," said Bob Griffin, chief executive of Jack Cooper Transport Co., an 80-year-old Kansas City-based car hauler for GM and other automakers

.As GM suffered, Cooper Transport did the same, losing $3 million monthly in the first half of 2009 amid a change in ownership and rumors of an imminent bankruptcy filing.

But nine months later, Cooper Transport continues operating — now in the black — and remains the second-biggest car hauler in the country.

And Cooper Transport and other suppliers now have something that has been growing since the pivotal summer of 2009: optimism.

According to a January survey by the Original Equipment Suppliers Association, 84 percent of those responding said they were "significantly" or "somewhat" more optimistic than they had been two months previously. And this was on top of expressing such optimism in the November survey.

The Woodbridge Group, a Canada-based firm whose Northland factory makes parts for the vehicles made at GM's Fairfax plant, is typical of this supplier sentiment.

"I don't know if we're completely out of the woods, but we feel a lot better about the situation than this time last year," said Jerry Norsworthy, general manager of the Woodbridge operations in Kansas City.

In fact, Woodbridge has added a third shift and more employees in response to GM doing the same at the Fairfax plant. Woodbridge has added 50 to 70 new employees since the first of the year, according to Norsworthy.

In addition, Faurecia's Riverside plant has added a third shift and about 100 employees, said Stacie Tong, a company spokeswoman. The France-based auto-equipment supplier produces seats for the Chevrolet Malibu and Buick LaCrosse, now being built around the clock at the Fairfax plant.

Faurecia now has more than 300 employees at the Riverside location, Tong said.

But jobs haven't come back at Johnson Controls Inc., which eliminated a second shift and about 90 jobs at its new Northland facility last fall when Ford Motor Co. eliminated a second shift building F-150s at its Claycomo plant. Ford transferred those workers to a third shift to build Ford Escape/Mercury Mariner SUVs.

"It was tough losing that second shift building seats for the pickup," said Randy Bland, president of United Auto Workers Local 710. "But the SUV is selling well, and some of our people are getting overtime building parts for that vehicle."

Automotive equipment is one of three divisions operated by Johnson Controls, a diversified Fortune 500 company that built the Northland plant in 2008 to supply seats for the redesigned F-150. Originally expected to operate two shifts, Johnson Controls has cut back whenever the Claycomo plant has eliminated the F-150's second shift. Altogether, Local 710 now represents about 1,400 workers in area supplier plants, compared with about 2,100 at this time last year.

Still, the local supplier base has remained intact.

Several factors kept the industry from imploding at the time of the GM bankruptcy, said Dave Andrea, senior vice president of the equipment suppliers association in Troy, Mich.

In a typical bankruptcy reorganization, companies suspend payment to suppliers and other creditors. With the intervention of the federal government and the cooperation of lenders, that wasn't the case with the GM and Chrysler bankruptcies

."All the suppliers were paid for all the parts already shipped," Andrea said. "In most bankruptcies, suppliers would be lucky to get 20 to 40 cents on the dollar."

Both GM and Chrysler also idled most of their assembly plants in June and July. But before doing so, they made big payments to suppliers at the end of May, cushioning the blow for suppliers.

"You wouldn't want shutdowns like that on a regular basis, but that one time turned out to be a good thing," Andrea said. "The suppliers were able to keep all the cash in the coffers, and that gave confidence to the bankers who otherwise might have pulled the plug."

A few weeks thereafter, the federal incentive program Cash for Clunkers kicked in, spiking demand for new vehicles. That, in turn, prompted automakers to boost production schedules, getting suppliers busy once again.

Still, production levels were nowhere near the peak volumes of earlier in the decade.

Thus, car-haul companies such as Cooper Transport that operated hundreds of trucks found themselves with too many trucks, terminals and employees.

"We went from being an approximately $300 million company in 2008 to $150 million in 2009," Griffin said. "We had to cut a substantial number of jobs, to say the least. We went from having about 1,300 employees down to 600 or so."

Cooper Transport even had to park nearly 40 percent of its fleet of more than 1,000 trucks.

Amid the turmoil, the family-held company was sold to Innovative Equity Partners of Marietta, Ga., in May 2009. Cooper's operations were merged with Innovative's smaller car-hauler Active Transportation Inc. of Joplin, Mo.

Griffin was appointed CEO in July. He was brought in from Leggett & Platt Inc., a Carthage, Mo., manufacturer of components for a variety of products, including furniture, beds and even automotive seat support systems.

To survive the year, Griffin said, the company needed help from its customers and union.

"Our customers agreed to pay us in seven to 10 days, instead of the 30 days it normally takes," Griffin said. "Some of that is still going on, but we're moving back to a normal payment schedule."

While Cooper Transport has not sought the widespread concessions from its Teamsters work force obtained by its biggest competitor, Allied Holdings, Griffin said the union has provided relief in certain regions of the country.

"We needed help in places like Michigan and other pockets really hit hard by the auto industry's collapse," Griffin said. "The Teamsters have been more than willing to work with us. It's been a very positive chain of events."

Fred Zuckerman, the union's national car-haul director, said that with vehicle sales expected to be only slightly better this year than 2009, he doesn't expect the industry to recover until mid-2011.

"But Jack Cooper is still in business, and that's a good thing," he said. "They're still providing good jobs to our members."

And Cooper Transport is looking to expand through acquisition of smaller players, Griffin said. Such consolidation could eliminate "deadhead" miles, the industry term for return trips in which trucks are not carrying loads back to their original terminals.

In addition, Griffin said, Cooper Transport is looking to expand into the car-auction market.

The company slowly is boosting employment, which has risen back to about 750, according to Griffin. When seasonal activity picks up next month, Cooper Transport should be back to 900 employees.

The company has about 100 area employees, with headquarters at Crown Center and a terminal next to GM's Fairfax plant.

After losing $3 million monthly for the toughest period, the company is producing a positive monthly cash flow of about $3 million, said Mike Riggs, Cooper Transport's chairman. The company's intent is to get back to profitability in 2010, with annual revenues back close to $300 million.

"We're No. 2 like Avis, so we're going to try harder," Riggs said. But officials at Cooper Transport and elsewhere in the supplier network know that tremendous challenges remain for the auto industry.

Locally, workers worry about the Claycomo plant's future, as Ford has not yet announced a replacement for the Escape SUV, which is expected to end production here by the middle of next year.

"In the short term, people are feeling better and the outlook is pretty good," said Bland of the UAW. "But long term, we still don't know if GM is going to make it. We also don't know if Ford will replace the Escape, which has been really good for suppliers in the area. So we want to see what's going to happen further down the road."

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Jack Cooper Transport, headquartered in Kansas City, Missouri, is the second largest auto transport carrier in the nation, and one of the few remaining auto transport companies with Teamster union drivers. Founded in 1928, today Jack Cooper operates 26 terminals throughout the U.S. and Canada, owns a fleet of 1,400 state-of-the-art trucks and transports over 1.6 million new and pre-owned automobiles and trucks annually. Jack Cooper is known for its integrity, outstanding service, quality performance and innovative strategies and has been the recipient of numerous vehicle transportation quality, service and safety awards.