Why Fikes failed

By Clarissa Hawes, Land Line contributing writer

Reacting to the shocking news that Fikes Truck Line of Hope, Ark., was abruptly ceasing operations, a Land Line reader described the 74-year-old trucking company's demise as "a once-great giant that has been driven to the grave."

Months later, Gary Salisbury, chairman and chief executive officer at Fikes, says a skeleton crew of around six employees remains behind sorting out who is still owed money. He told Land Line in late August that it has been a time-consuming process. At this time, he said there is no set time frame as to when trucking companies, owner-operators and agents may expect to be paid.

"I would like to think that we will get them paid as soon as we can, but I can't tell you if that will be in three months, six months, or even a year," Salisbury said. "This has been a harder process than I expected, trying to sort out who has been paid or not paid and the accurate amount they are owed. But we are still trying to get them all paid."

Rumors started swirling in the trucking industry in early May that the truck line was experiencing serious cash flow problems and was selling out to a larger carrier. Days later Salisbury confirmed that the company was indeed ceasing operations, but denied that another company, Blair Logistics of Birmingham, Ala., was buying its assets.

The death knell came in late 2014 and early 2015 when Salisbury said an Arkansas bank cut off the company's line of credit without warning a day after hundreds of payroll checks had been mailed.

"We found out our bank wasn't willing to work with us, and we had checks hanging out there all over the place that we couldn't cover," Salisbury said. "We tried our best to get it taken care of, but we just couldn't recover after that."

Perfect storm

After experiencing tremendous profits in 2007, Salisbury described what happened next as "the perfect storm." He blames the company's downward spiral, starting in 2008, on bad financial moves; the housing bubble that burst; and attempts to get in front of impending federal safety regulations by transitioning the flatbed fleet of owner-operators to electronic logs and satellite tracking systems as key reasons the company failed.

Salisbury said the company limped along for nearly eight years, but never really turned a profit after that record year in 2007.

"We might have made a little money here and there, but it wasn't enough to really recover from the housing market bust," he said.

Then around 2010, he said the Fikes safety team turned its sights on its CSA score, and pushed satellite tracking systems and electronic logs - a move that proved detrimental to the 74-year-old truck line.

"Besides the recession, when we announced we were going to start using satellites in our trucks and were going to transition over to e-logs, it seems like we lost 40 percent of our fleet in a blink of an eye," he said. "I don't think we were prepared for that reaction from our 25- and 30-year owner-operators who made it clear they weren't going to run e-logs. We went from having about 550 owner-operators to about 300 trucks and we never really recovered from that."

"I tried not to get pushed, to get pressured by the industry, but we made some mistakes in 2009 and 2010 when we were trying to recover from the recession," he said. "I think what happened to Fikes is we got into the freight business, and we got out of the people business."

Soft landing?

In late April, despite all of its efforts, Salisbury said it became clear that the company wasn't going to survive.

Almost immediately, he said Blair Logistics of Birmingham, Ala., stepped up, offering to hire his fleet of owner-operators in exchange for a non-compete agreement that Salisbury wouldn't start another flatbed company for one year, a deal he readily accepted.

"I felt it was important for our folks to talk to the same people, the same dispatcher, the same safety people they had been talking to for the past 30 years," he said. "I wanted this transition to be as soft of a landing as we could make it for them."

This move to transition over to Blair Logistics blindsided many of the Fikes owner-operators, who found out the company was closing in a handwritten note they received from the new management team at Blair. During this time, they say the Fikes management team went silent as Blair Logistics' staff moved into its headquarters a day after the closure was announced.

One longtime Fikes owner-operator said he and others were under loads, but went ahead and delivered them to their customers, who he says were caught in the middle of a "bad situation that wasn't their fault."

One trucking veteran, who drove for Fikes for nearly 13 years, made the transition over to Blair Logistics, but left after 90 days.

"I joke to people that I had one job for 13 years, and now I have had three jobs in the past three months," the driver, who did not want to be named, told Land Line in late August.

When asked if the transition over to Blair Logistics had been a smooth one, he described it as "a rocky one at best."

"I spent more time sitting than what I should have been doing and that's driving a truck," he said. "I don't think it was anyone's fault. We were used to things a certain way at Fikes, and Blair's people were trying to make adjustments, too."

Out of his orientation class at Blair Logistics, he said "none that I know of have stayed."

"Most of the guys I went through orientation with had been with Fikes for over 10 years," he said. "Those guys knew what they needed per mile to make money, and they weren't getting near that."

What went wrong?

John Howell, who worked as an agent for Fikes for more than 10 years, said there were some red flags that the company was struggling in the past few years. Without much explanation from Fikes' management team, he said the company switched from its direct deposit system over to wire transfers and manual checks.

Then he started receiving calls from brokers asking him why Fikes was factoring bills.

"I once thought Fikes was a solid company, but I became nervous when I heard they were doing that (factoring)," Howell told Land Line. "That puts up a big red flag because you do this when you are short on cash flow."

Howell, whose terminal was ranked No. 1 in revenue for the past 10 years, is still owed $10,000 from Fikes.

While being repaid the money he is owed would be nice, Howell said he will be OK. He worries about the mom and pop trucking operations who are teetering on the brink of closure because of the financial situation.

One of the companies Howell is concerned about is Mike Elliott Trucking of Belvidere, Tenn., which is still owed more than $40,000 from Fikes. Amy Hill, who works in the office at the small trucking company, said in late August that the company may not recover if they are not paid soon.

"Our check from Fikes has been returned three times," Hill said. "At first, they blamed it on a bank error, then we were told we were next in line to be paid, and now they just won't respond at all."

In late August, Gary Salisbury still had no plans to file for bankruptcy unless he is forced to by creditors. He again stated that he stands behind his initial statement that he is committed to paying those who are owed money from Fikes.

"It's been a tough situation to watch this all happen," Salisbury said. "I have worked hard building this truck line since I was 21 years old." LL