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When Your Shipping Provider Changes

A few weeks back, XPO Logistics bought Con-way. I had suspicions then that things may not go smoothly. Now we find out that XPO’s stock lost nearly a third of its value post-acquisition.

This article looks at the XPO-Con-way acquisition from an investor point of view but it’s also interesting from a customer’s point of view. There are two basic concerns here that the author addresses:

  1. Did XPO hamper themselves by taking on too much debt?
  2. Will XPO’s change of direction (XPO has been good at being a broker, will they be good at being a carrier?) be too much of a puzzle for their management team to solve?

The second one is the one I’m focusing on… In 2006 I joined a major shipping company that was born out of a merger of two small-to-midsize carriers. In the result of blending two sets of physical plants, two sets of managers, two sets of dispatchers and operational staffs, two sets of internal software, two sets of sales staffs, two sets of customers…was pure chaos. I heard stories of shipping yards full of trailers (full of customers’ goods) sitting in freight yards for weeks because the right hand didn’t know what the left was doing. I personally saw petty rivalries (managers from one merged company undermining managers from the other merged company at the expense of customers) blow up. I heard managers get yelled at by irate customers because their freight was lost… It wasn’t pretty.

This is what I fear for XPO & Con-way (and their customers). I have no doubt Con-way is good shipping company (I competed against them for years). And I don’t doubt that XPO is a good brokerage (we compete against them now). I just can’t help but wonder if XPO has bitten off more than it can chew and if their customers (XPO’s and Con-way’s) will suffer for it.

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