Moving to Consolidate : Mergers Among Haulers Not Expected to Hit Consumers
A nationwide glut of moving firms that has kept a lid on consumer moving costs for the past decade is about to start shrinking. But the bargain prices are expected to keep rolling along.
The moving industry--like the airline and trucking industries, it has been grappling with deregulation since the early 1980s--is suffering from having far more trucks than customers who can fill them with furniture, clothes and office gear.
That imbalance has led not only to flat sales growth year after year, but also rampant discounting among movers as they try to grab market share from each other. The result has been great deals for consumers and dwindling profits for many of the carriers.
To ease the glut, some of the industry’s big players are starting to consolidate.
In a deal expected to close today, UniGroup Inc., the privately held parent of United Van Lines, will buy Mayflower Group Inc.’s moving division for $90 million. The first-ever merger of two giant movers, the deal will extend UniGroup’s lead as the biggest U.S. hauler of household goods and boost its annual revenue to about $800 million a year.
The merger is also likely to be the first of several such marriages in coming months, as rivals try to keep pace with the industry leader and all of them try to wring out the excess supply, executives said.
Indeed, Mayflower rebuffed a takeover bid from Bekins Co. before agreeing to join with UniGroup, which is based in suburban St. Louis.
“We expect to see more (mergers) because there has not been consolidation in this part of the transportation industry and it needs it,” said Roger Cloutier, Bekins’ executive vice president. Bekins is owned by IMR Fund LP, an investment firm controlled by Minneapolis financier Irwin L. Jacobs.
But consumer prices probably won’t spurt higher even if more mergers occur, executives said.
“I don’t see the consumer being hurt at all, because you’re still going to have an abundance of competition,” UniGroup President Robert J. Baer said.
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Like many airlines, moving firms are viewed by the public as largely homogeneous: None stands out in terms of service or other qualities to command notably higher prices than the others, said J. Ross Pruett, an owner of Supermovers Inc., a Dallas agent for Paul Arpin Van Lines.
Mergers, by eliminating some rivals, might be expected to help the remaining movers raise prices. But with more than 1,000 smaller, independent moving firms in the United States, the big carriers “don’t have the luxury of testing that theory,” for fear of losing valuable market share to movers that don’t raise prices, Pruett said.
The firms began offering customers huge discounts of 50% or more from their standard, or list, prices after the industry was deregulated in 1980, “and frankly, we’ve not been able to get out of that spiral,” Baer said.
The trade group American Movers Conference says average prices for household moving--measured by how much movers were paid for every 100 pounds they carried per mile--rose a paltry 9.5% between 1982 and 1993, or less than 1% a year.
A typical family move of 4,000 pounds of furnishings from Los Angeles to the East Coast costs about $2,315, excluding packing fees and other extras, said Eugene Luni, owner of Gemini Moving Specialists, a United Van Lines agent in North Hollywood.
That’s only about $250 more than it was five years ago. “Services have gone up and prices have stayed flat or gone down,” said Michael L. Smith, chairman of Mayflower.
Movers have also been hurt by factors beyond their control. Although one of every six Americans still moves each year, the public’s need for big-scale moving firms has been dampened in recent years by the recession, corporate cost cutting, plunging defense contracts, military base closures and the growing use of self-help movers such as U-Haul and Ryder.
The most recent figures from the Interstate Commerce Commission show that the 21 largest U.S. movers hauled 4.4 million tons of goods in 1993, an increase of only 6% since 1989.
Among the six biggest movers, only United and Atlas Van Lines--an Evansville, Ill.-based firm that, like UniGroup, is owned by its agents--showed gains in tonnage shipped during that period.
Combined with the price cutting, the sluggish growth has taken a toll on movers’ profits.
For instance, Mayflower--which will keep its name and remain separate from United after its purchase by UniGroup--saw its operating profit plunge 57% in 1993, to $5.7 million, as its revenue edged up only 3% to $442 million.
There are several players involved in an average household move, of which the moving firms are only the most visible.
Say a family moving from Los Angeles to Chicago chooses Bekins to handle the job. Bekins’ central office notifies one of its own agents or an independent agent licensed by Bekins in the Los Angeles area. The agent, in turn, assigns the job to a driving crew.
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The driving crew typically gets 55% of the move’s cost, and the agency that booked the job gets about 18%. Bekins--for scheduling, billing and disbursing funds--gets 15% to 25%, and the rest goes for insurance and other costs.
Mayflower’s Smith said that any cost savings generated by future mergers among big movers will probably flow to the agents who actually ship the goods, so they can boost their incomes without having to alienate customers with higher retail prices.
“I really don’t see the mergers’ benefits coming at the expense of the consumer,” Smith said.
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Tracking the Big Movers
A handful of companies dominate the household-goods moving industry.
1993 REVENUE
In millions United Van Lines-Mayflower Transit*: $781.3 North American Van Lines: $446.5 Allied Van Lines: $355.8 Atlas Van Lines: $215.5 Bekins Van Lines: $168.3
TONNAGE
Millions of pounds
1993: 4.37
INDUSTRY REVENUE
In billions
1993: $2.43
Note: All figures are latest available.
* Reflects United-Mayflower merger to be completed today.
Sources: Interstate Commerce Commission, American Movers Conference, Company reports
