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Biesterfeld’s ouster could trigger major changes at Robinson

Company needs to pivot to digital-heavy successor amid tough competition and slowing volumes, analysts say

Big changes lie ahead in the wake of Biesterfeld's ouster (Photo: C.H. Robinson)

The fallout continues from Tuesday’s abrupt firing of C.H. Robinson Worldwide Inc. President and CEO Bob Biesterfeld. Most of it has been negative, with some rays of hope thrown in.

Analyst reaction to the move was fairly harsh. Tom Wadewitz of UBS slapped a sell recommendation on Robinson (NASDAQ: CHRW) shares with an $81-per-share 12-month price target. That is well below the $90.80 per share level where shares closed on Wednesday. Ken Hoexter of Bank of America/Merrill Lynch downgraded the shares to neutral from buy and cut his 12-month price target to $95 a share from $104.

Amit Mehrotra of Deutsche Bank was probably the most sanguine. Mehrotra acknowledged that Robinson’s earnings power may be impaired by decelerating volumes, lower contract rates and a “fast normalizing” global freight forwarding business off of very high levels. However, he said there’s not a lot of downside in the shares from the current price range.

The macroeconomic weakness affecting the brokerage giant was beyond Biesterfeld’s control. Nor could he stop the compression of contract rates — which generally account for more than 60% of Robinson’s brokerage business — in the wake of the 2022 collapse of spot market rates.

Contract rate moves, which typically lag spot rates by about six months (though the timing may vary a few months), are about to see what Wadewitz called a “competing down.” As contract rates decline to meet spot rate levels, Robinson’s North American Surface Transportation (NAST) net revenue, or revenue after transportation costs are factored in, may drop as much as 20% in 2023, he said. NAST is by far Robinson’s largest unit, with nearly $5.8 billion in gross revenue through the first nine months of 2022.

More than macro issues

Biesterfeld’s departure — announced on the first business day of the year with no transition period — sends a signal that Robinson’s board and stakeholders were unhappy with his performance and the pace of change in his 3 ½ years at the helm. Robinson’s total return of 18% during his tenure lagged the S&P 500’s return of 42%.


The last straw for the board may have been Robinson’s third-quarter results, which were released on Nov. 2. The company reported year-on-year declines in gross revenue, as well as operating and net income. Operating expenses rose 12.4% to $599.6 million, led by a 21.3% jump in selling, general and administrative costs.

It didn’t help matters when Biesterfeld told analysts that demand and freight rates, which the company had expected to weaken, declined faster and further than he had projected.

At the time it released its quarterly results, Robinson announced a cost-reduction program aimed at reducing operating expenses by $175 million in 2023. At the heart of the cost-cut plans was the layoff of 650 employees, or about 6% of its workforce. That was announced on Nov. 9.

However, to achieve the $175 million in gross cost savings, Robinson would have to reduce head count at NAST and its “other and corporate” unit by much more than 10%, Wadewitz said. In 2021, personnel expenses accounted for 75% of Robinson’s total operating expenses.

The third-quarter results and Biesterfeld’s subsequent comments may have been the catalyst for the board to do what it had already begun to plan. The sense among executives, shareholders, analysts and board members was that the company wasn’t moving fast or effectively enough to transform into a digital platform away from traditional brokerage, especially in an increasingly competitive segment. There was also a sense, said one executive intimately involved in the matter, that Biesterfeld was not the best long-term fit to run a nearly $25 billion business.

Biesterfeld was “over his skis,” said the executive.

Board Chairman Scott Anderson will serve as interim CEO (no president was named), and Jodie Kozlak, who runs a consulting firm, will be independent board chair. The focus now turns to a permanent successor, and whether Biesterfeld’s departure triggers significant changes in the company’s operations. One internal candidate for the top job is Arun Rajan, the current chief operating officer and an advocate of the rapid uptake of digital brokerage processes.

In his Wednesday note, Mehrotra said a new CEO needs to focus efforts on a “harder pivot in strategy away from traditional brokerage and toward a more digital platform to improve productivity, with perhaps some bold M&A to accelerate that shift.” Given Robinson’s size and scale, a new CEO would “likely need to come from an existing brokerage house with a proven track record in order for investors to get behind the potential transformation,” he said.

Whoever takes over will have to deal with ramped up competition — the latest being the RXO Inc. (NYSE: RXO) pure-play brokerage spinoff from XPO Inc. (NYSE: XPO) — as well as what is believed to be discord among Robinson’s employees, analysts said. Hoexter said that RXO should be the prime beneficiary of any defections of high-level IT talent from Robinson.

Perhaps the most intriguing scenario comes from Brittain Ladd, a longtime logistics and e-commerce consultant and one not shy about airing his opinions. In a LinkedIn post Tuesday, Ladd said Robinson needs to “think big” and consider acquiring or merging with international freight forwarder Flexport. Then Robinson should name newly minted Flexport Co-CEO Dave Clark, who made his name running Amazon.com Inc.’s (NASDAQ: AMZN) transportation and logistics operations, as CEO of the combined company.

In an email Wednesday, Ladd said he had floated the idea among several Robinson executives at the vice president level. The executives were receptive, according to Ladd. One executive, who Ladd said has worked at Robinson for 20 years, said Biesterfeld was not an innovator in Clark’s mold. 

Ladd said the Robinson executive told him that “we have to do things differently.”

4 Comments

  1. Robert

    What’s interesting to me is, why search for a CEO; Elon Musk says “it’s a made up position.” Why not save time and money and lateral move the real CEO (COO). This seems not only logical but necessary given his background and real time knowledge with the company, we can find a motivator and have them travel around the country to visit, motivate and hold people accountable in another capacity. We all understand what time is and it may not be what you think:

    T- Truckers
    I – Ignoring
    M – Money
    E – Everywhere

    We all also understand the importance of the pivot I am sure, just slow in the delivery; right?

    P – Protecting
    I – Individual
    V – Volatility
    O – Occurring in
    T – Trucking

    So much time wasted exploring the decision making process instead of just taking the pivot and moving on expeditiously, where in fact you would increase your revenue and keep wondering how you did it.

    Regards.

  2. Daniela D

    As a mid sized carrier I love and appreciate the current CH model. Most of us long lasting, real and responsible carriers love the carrier rep – carrier relationships CH offers. Let alone the stability one on one communication and easy booking process on their Navisphere app. Most carriersusing digital brokerages like Convoy and Loadsmart are newer “flash in the pan carriers” and scammers (double brokers) because accountability is not required and there are no quality control checks by the app. You could be in business one day and gain access to their app. As far as XPO goes they don’t pay their bills and their credit is bad. My assumption is the new spin off will eventually end up the same. Their carrier relationships are non existent and they don’t care. I have been in this business for 30 years now. Back to basics works. CH model stood a test of time. They provide service to both customers and carriers. They also CARE for both. Eventually that has to triumph over cheap freight no relationships and no accountability.

  3. DS

    CH just watched as digital brokers made all the headway and they did little to get on that digital train. Ironically, CH already had both the customers and the carriers, so creating a totally digital experience wouldn’t have been that hard or expensive for them, but they just didn’t do it.

    For their shipper customers, they need auto/AI tech to fully automate the quote-to-book process like all the big digital guys already have (Convoy, UF, Loadsmart). They need more TMS tech used by all their little carriers to connect them into CH (they already offer Ascend TMS), they need easier visibility onboarding from P44, FourKites, and others, they need a better app for owner ops (like a Transflo or Trucker Tools all-in-one type experience), and they need to catch up to the full digital experience offered by leaders in other industries. That takes a lot of work that I guess Bob wasn’t willing to do, and the numbers couldn’t hide it.

    All the big digital brokers took their business from somewhere, and a lot of that business came straight from CH right from under their noses.

    But, don’t count out CH just yet. They have the cash. They have the customers. They have the carriers. They now just need to provide them with the unified digital technology to digitize it all like UF and Convoy have been doing for the last 5+ years.

    Look for some big bold changes from CH this year!

  4. Modern art

    No vision. Just copy cat stuff. Digitization isnt it. They are called cheap and heavy for a reason. Buck the trend because you are the market. money talks. Honestly, ch started the bs with macro point and we stopped using them for years. Third party 3pl should let freight carriers choose how to handle updates. Freedom is trendy. Capitalize that. We prioritize brokerage companies who don’t require tracking. Building relationships

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.