Deregulation of the U.S. trucking industry began in the late 1970s. Congress passed the Motor Carrier Act of 1980 and it was signed into law by President Carter on July 1, 1980.
One of the most dramatic changes due to deregulation was the virtual explosion in the number of trucking firms. From 1980 to 1990, the number of licensed carriers doubled – from fewer than 20,000 to more than 40,000!
Deregulation provided great opportunities for existing and new U.S. trucking companies. However, not every pre-deregulation trucking company was able to handle the new conditions and competition. American Carriers was one of those companies. However, before that story is told, another must be told.
Texas Gas/CSX Railroad
When two Class I railroads merged in 1981 into the nation’s largest railway system, they called the new company the CSX Corp. The “C” stood for the Chessie System, “S” was for Seaboard Coast Line Industries and the “X” was for assorted non-railroad properties included in the deal. Over the next two years, CSX sold or spun-off many of its “X” properties. But in 1983, CSX reversed course to strengthen its “X” with a $1 billion offer to buy Texas Gas Resources Corp.
Earlier in 1983, Burlington Northern Railroad (now part of BNSF Railway) gained a controlling interest in El Paso Co.
In 1983 CSX was the nation’s largest railroad, with 20,000 miles of track in 22 states in the eastern and north central regions of the country. It also had energy concerns as America’s largest hauler of coal. A merger meant that CSX would become one of the country’s major transportation and natural resource companies. At that time, CSX’s long-term plan was to focus on its strengths – transportation and natural gas.
A Texas Gas-CSX merger concentrated control of the shipment of two competing fuels – gas and coal (a much more important fuel then than now) – in one company. This was especially true in the Ohio River basin – CSX owned the rail lines and Texas Gas owned the pipelines.
Despite its name, Texas Gas Resources Corp. was headquartered in Owensboro, Kentucky. It was a gas pipeline, oil and gas exploration and production company. It also owned trucking and barge subsidiaries.
Critics also contended the merger would create a monopoly in the transport of bulk products including coal, phosphates, fertilizers, paper, metals, grain, soda ash and building materials, since CSX was the primary railroad in the Ohio River region while a Texas Gas subsidiary, American Commercial Lines, a barge company, was the largest mover of bulk commodities along the region’s waterways.
Anticipating another potential antitrust problem, Texas Gas said it would move forward with its previously announced plan to sell its trucking subsidiary, American Carriers Inc.
A less-than-truckload (LTL) common and contract general commodities carrier headquartered in Overland Park, Kansas, American Carriers had been founded in 1976. At that time, Texas Gas purchased the South Dakota-based All American Freight System and merged it with the Atlanta-based operating authority of Terminal Transport. This merger created the fourth-largest trucking enterprise in the United States at the time (pre-deregulation). The new company was called American Carriers, Incorporated and functioned as the trucking division of Texas Gas.
Eventually, American Carriers, Inc. had several subsidiaries of its own. These were U.S.A. Western Inc., U.S.A. Eastern Inc., American Freight System Inc. and Midwest Coast Transport.
As noted above, American Carriers, Inc. operated as the trucking division of Texas Gas until Texas Gas merged with CSX in 1983. American Carriers, Inc. and its subsidiaries were then spun off into a separate entity.
At first, American Carriers experienced significant success. Within its first year of business as a stand-alone company, American Carriers had established significant business in 31 states and opened seven new terminals in California as well as four other terminals in other high-volume business areas. In 1984, American Carriers Inc. reported net income of $5.5 million on revenues of $361 million.
In 1987, American Carriers purchased Smith’s Transfer, a large trucking company located in Staunton, Virginia. Smith’s Transfer also specialized in LTL hauling, but primarily operated in the eastern half of the United States. The acquisition was meant to bolster the services that American Carriers Inc. already provided. While Smith’s Transfer had been trucking for decades, it had recently fallen on hard financial times.
Unfortunately, American Carriers began to experience financial difficulties after acquiring Smith’s Transfer. Almost immediately after the acquisition, American Carriers was forced to shut down many of Smith’s Transfer terminals. Less than a year after the acquisition, it was clear that American Carriers was in trouble. The company’s two main subsidiaries, American Freight Systems and U.S.A. Western Inc., both filed Chapter 11 bankruptcy in 1988.
American Carriers Inc. stated that although its main subsidiaries had declared bankruptcy, it would not, and company officials began looking for ways out of debt. While they did this, representatives from the Brotherhood of Teamsters union came calling, looking for pension funds that were due to drivers who had been let go in the layoffs from Smith’s Transfer.
Finally, American Carriers elected to sell its last operating subsidiary, Midwest Coast, in December 1988. One day later, a federal judge demanded that the company declare Chapter 11 bankruptcy after the company had refused to do so voluntarily.