The trucking industry and its support businesses have been an engine of Chattanooga's growth over the past decade, but a couple of its key players are hitting the brakes this winter with some of their local operations.
Coyote Logistics, the freight brokerage firm that UPS bought after the business helped launch much of Chattanooga's startup success in logistics when the company began as Access America, said it is shifting 25 carrier sales jobs from Chattanooga to its Atlanta headquarters "to improve efficiency and customer service."
At the same time, one of the Chattanooga's most successful startups — the logistics data and news company known as Freightwaves — has trimmed its staff by just over 20 workers in the past three months and is putting a pause on any immediate plans for another downtown building, company founder and president Craig Fuller said Monday.
The moves come as the trucking industry struggles to find a new balance after shipments failed to grow as fast as the trucking inventory, creating net losses in the second half of 2019 for Chattanooga's biggest trucking company, U.S. Xpress Enterprises, and reduced earnings last year for cross-town rival, Covenant Transport.
"There are a lot of cyclical headwinds and freight has been in a bit of a recession," said Fuller, who business tracks the industry and has been forced to limit its own explosive growth pace. "We had to cut back after we had been growing really aggressively because frankly our customers are not doing as well as they had been. We grew our staff faster than our revenues so we had to make these cuts."
After doubling its staff from 80 to 165 workers in the previous year, Freightwaves has cut its staff to about 140 workers today, Fuller said.
"A large portion of the reduction was associated with our international markets and coverage and were not located in Chattanooga," Fuller added.
The local logistics companies are not alone in trimming staff. C.H. Robinson Worldwide, Inc., a third-party logistics company that also offers brokerage services, reported an 8.3% drop in revenues in the fourth quarter and imposed system-wide cuts on its sales force. Echo Global Logistics ended 2019 with 2.7% fewer brokers than the previous year.
UPS spokesman Matthew O'Connor stressed that Coyote is still a growing company and a key part of the logistics brokerage business for UPS.
"Once those jobs are transitioned to Atlanta, we'll still about 110 people in Chattanooga and the business is continuing to grow," O'Conner said.
UPS acquired Coyote Logistics for $1.8 billion in 2015, just a year after the Chicago-based Coyote bought the Chattanooga startup Access America. In the past five years, Coyote has doubled in size, with an estimated 2019 revenue of $4 billion, according to Freightwaves.
Over the past decade Chattanooga has grown its logistics industry with a half dozen freight brokerage firms building on the local foundation created by two of the nation's top 10 long-haul trucking firms — U.S. Xpress and Covenant Transport — and the nation's biggest privately owned warehouse logistics company, Kenco.
Last year, Inc. magazine identified eight of the 13 fastest growing small businesses in Chattanooga in the logistics field, including the freight brokerage firms of LYNC Logistics, Trident Transport and Steam Logistics. Fuller has championed the growth of such companies, and the insurance, staffing and support businesses for the industry, as part of Chattanooga's "freight alley."
Fuller said he still expects the industry conditions to improve in the second half of 2020 and beyond to triple Freightwaves sales in the next year. But for now, Fuller said "we've hit the pause button" on adding more staff and expanding its downtown facilities.
Freightwaves is looking at using part of the long empty John Ross building at Fourth Street between Market and Broad streets downtown for a video production studio and office.
Freightwaves raised $35 million in venture capital over the past three years, but Fuller said investors are becoming more wary about investments in startups, especially after such ventures as WeWork and Uber failed to turn the hoped-for results in their initial stock offerings.
"I think everybody thought the market would come back quicker this year, but I'm afraid that this coronavirus may cause another hit on the market," he said.
Contact Dave Flessner at email@example.com or at 757-6340.