Transcon to Buy Trucking Unit of Loss-Plagued Rival

Transcon Inc., a money-losing Los Angeles trucking company, agreed Thursday to buy Coastal Corp.’s loss-ridden trucking operations in a move that would create the nation’s fourth-largest long-haul trucker.

The price was not disclosed, but Coastal said its trucking equipment and property was valued on its books at $132.3 million at the end of 1988.

“They were a motivated seller,” a Transcon spokesman said. “We got a good price.” The spokesman said Transcon plans to borrow the money needed to buy Coastal’s ANR Freight Systems and Transport USA subsidiaries.

Transcon said its acquisition of Coastal’s trucking companies would improve the efficiency of both operations. Transcon expects to reduce costs by consolidating truck terminals and routes.

“Transcon will now be better positioned for future growth and acquisitions,” said Orin S. Neiman, chairman of Transcon Inc.

A Transcon spokesman said the company expects to earn a profit during the second half of 1990 despite higher interest costs associated with the acquisition.

George G. Morris, a trucking industry analyst with Prescott, Ball & Turben in Cleveland, questioned a merger of two money-losing operations. “They do not offer competitive service in price or in delivery points,” Morris said. “Whether you can put the two together and make money, only time will tell.”

Coastal’s trucking operations have not shown a profit since the Houston-based energy company acquired them as part of its 1985 merger with American Natural Resources. In 1988, Coastal’s trucking companies lost $4.9 million.

Morris said Transcon has been in a financial “free fall” due to the aggressive rate cutting that followed industry deregulation in 1980. Transcon, with about $320 million in sales, has been unable to compete effectively against industry giants Roadway, Yellow Freight and Consolidated Freightways, he added.

The acquisition of Coastal’s trucking companies will give Transcon revenue of around $700 million. Even so, it will still be dwarfed by industry leader Roadway, which has around $2.2 billion in yearly sales.

Transcon has tried several measures to lower costs over the last several years. In 1983, it gave employees a 49% stake in the company in exchange for 12% wage cuts. After losses in 1987 and 1988, the company disbanded the ESOP in April and distributed 39% of its shares to its employees. The ESOP was then replaced with a profit-sharing plan in return for continued wage concessions.

So far this year, Transcon has been able to trim its losses. For the nine months that ended Sept. 30, Transcon lost $16 million, contrasted with $24 million for the first nine months of 1988.

A Transcon spokesman said the company did not anticipate any problems merging work forces because both Transcon and Coastal trucking employees are represented by the Teamsters and have similar profit-sharing programs.