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Former Falcon Transport execs allege mismanagement, contract demands led to company’s abrupt collapse

FreightWaves podcast Special Report

Photo: Timothy Dooner/FreightWaves

 

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FreightWaves’ Field Reporter Timothy Dooner contributed to this report

Former Falcon Transport executives allege that financial mismanagement and a poorly negotiated contract with General Motors led to the company’s abrupt closure on April 27.

Falcon shuttered its doors after sending a message to nearly 500 drivers to cease driving immediately. The company also had nearly 90 office employees at the time of the closure.

One former operations manager told FreightWaves the company was struggling to meet payroll every week prior to the sale of Falcon to private equity company, CounterPoint Capital Partners of Los Angeles, in September of 2017. Those financial issues continued under new management and until the company ceased operations on April 27.

CounterPoint purchased Falcon in a leveraged buyout for $27 million, with an additional $33 million in debt financing, according to PitchBook.

Executives of CounterPoint did not return telephone calls, emails or messages sent via LinkedIn. The company has since shut down its website and its telephones are no longer working.

Sources who worked at Falcon at the time of the sale allege the Constantini family, which owned the company for four generations, had to pay the private equity group millions of dollars to buy the fledgling company to avoid shuttering operations.

Another former Falcon executive, who left shortly after the company was sold, confirmed the Constantini family paid CounterPoint a “substantial amount of money” to buy it, but wasn’t privy to the financial details.

Prior to leaving Falcon in 2017, one former executive said he attended meetings with CounterPoint, which received millions of dollars in concessions from General Motors and its vendors. He claims that Falcon never received a “cash infusion” from CounterPoint after the sale to pay back money owed to vendors and other expenses and never was on solid financial footing.

“I thought all of the vendors [would] get made whole and CounterPoint [would] establish some normalcy,” a former executive who did not want to be named, told FreightWaves. “That never happened. I would hear from vendors [after the sale] constantly claiming that they are still not paying.”

Although he left the company nearly two years ago, a former executive said he received a call from a bank that did business with CounterPoint two days ago wanting to know where their equipment was located.

“They [CounterPoint] wouldn’t even get on the telephone with the bank to tell them where their equipment is,” the source alleged.

One of the main reasons for Falcon’s demise was that CounterPoint had no logistics experience prior to purchasing the floundering trucking company.

“They had zero transportation experience,” a former Falcon executive said. “There’s a lot of moving parts to it. You don’t just put freight on a truck and it gets there.”

Poorly negotiated GM contract

One former Falcon executive said that General Motors’ decision to no longer produce the Chevy Cruze at its Lordstown, Ohio, plant, which was one of the flatbed division’s primary accounts, may have been the final nail in the coffin that led to the company’s closure.

However, he said Falcon never had the financial stability to meet GM’s harsh contract demands prior to selling to CounterPoint and that the company’s financial situation never improved.

“I think the [contract] was bad and with the financial difficulties, then you put into the mix somebody who doesn’t know the transportation business, especially just-in-time deliveries, you never are going to win,” he said.

There never was any room for error and Falcon struggled with handling the automaker’s just-in-time demands, said another source.

“We got charged $80,000 one time on a [missed] load. We were at fault, absolutely, but is $80,000 an appropriate response for one missed load at $1.10 a mile? No, it’s not,” another source said.

“If you couldn’t cover a load, you were penalized,” he said. “With that being said, the rates were not in comparison to what you would expect to be paid for taking those risks.”

As of press time, General Motors did not return FreightWaves’ telephone call about the former Falcon executives’ claims.

A former dispatcher, who didn’t want to be named, said before he left the company in late 2018 that if Falcon missed an on-time delivery and GM needed parts, the automaker “could charter a jet and fly the parts down from Detroit to Arlington, Texas, and stick Falcon with the bill.” Other times, he alleges that if Falcon didn’t have a driver able to make the route to Arlington, GM would hire an expediter to haul the load “at Falcon’s expense.”

Financial mismanagement claims

Former employees alleged Falcon was in financial straits prior to selling out to CounterPoint.

At various times, fuel cards were shut off because Falcon had exceeded its credit limit, one former dispatcher claimed. It was also a common practice for office personnel to use their personal credit cards to pay the company’s E-ZPass bill and also purchase office supplies. They were later reimbursed by the company, he said.

And while the financial impact may have been dwarfed by GM’s hardball tactics, two sources claim that some employees who worked at the local Falcon Animal Rescue, a no-kill cat shelter that is still open, were actually on the trucking company’s payroll.

One former Falcon executive said the drivers will land on their feet as many have been offered new jobs, but it may take longer for the operations staff to find new employment.

Comprehensive Logistics, which lists Brad Constantini as its chief executive, is located in the same building as Falcon Transport.

The employee, who didn’t want to be named, told FreightWaves that Comprehensive has hired a few of Falcon’s former drivers to haul freight for its dedicated account with Ford Motor Company.

CounterPoint has gone silent and has not been in contact with former drivers and employees about its next steps, according to a former Falcon employee.

“This is going to take years to sort this all out,” he said.

 

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Clarissa Hawes

Clarissa has covered all aspects of the trucking industry for 13 years. She is an award-winning journalist known for her investigative and business reporting. Prior to joining FreightWaves, she wrote for Land Line Magazine and Trucks.com. Clarissa lives in Grain Valley, Missouri, with her family.

9 Comments

  1. This is what happens to the trucking industry it’s called gross negligence as guys get in to the trucking industry and have no clue on cost of day to day operational expenses.
    They go into these major manufacturer’s n take freight to haul for little to nothing n it has to struggle from day to day to keep drivers n moving freight as freight at toasts cost needs to pay like it did in the early 70’s where we averaged 4 to 8.00 dollars a mile plus.
    If you can’t make the price of a gallon of fuel per mile plus 30% your headed for doom and of shoppers n receivers can’t afford this well then o guess their business venture is doomed as well as overhead n demand suck up cash quick.
    You 4 or 5 trucks brake down at once the bill can be expensive not to mention driver payroll day to day fuel cost,tires, truck n trailer payments n insurance it’s hard yet brokers,shippers n receivers want it moved fast n cheap.
    So if you can’t pay a dull time driver 90 to 150.k a year for over the road trucking well then your moving freight to cheap.
    We need to change freight regulations and everybody charge the same rates and guess what dummies?their gonna pay the price if not they go out of business.
    Then you have a lot of receivers who have been stealing money for what they call a plumper fee.
    This in itself is illegal and has been since day one yet trucking companies pay instead of telling receiver they have one hour to take their freight off of your truck or it’s 225.00 an he for detention time for each hour afterwards.
    Well that’s it in a nut shell nobody wants to stick together n make trucking what it once was so now everybody suffers nice job guys

      1. leveraged buyout buy out says it all. Intentionally brought with the sole purpose of raiding the company assets and going bankrupt. Consistent with President Trump’s attitude toward business.

        1. Nobody makes money buying a company and shutting it down. These buyers must have inherited money because they are to dumb to have made the stuff themselves.

      2. I make 90k+ a year hauling fuel. Plenty of companies are paying that but you’re not going to make that hauling general freight

  2. As a former operations manager for falcon in Kansas City when the so called buyouts happened I can say that we all say this coming. The fact that the company who bought falcon out had closed some 90 percent of the companies it had bought out in the past and closed them all down for an unknown reason. The original owner decided to retire and split CLI and Falcon up with his sons. The one got the gold mine with CLI and the other said I dont want a trucking company. So with a poor excuse for corporate management in Ohio who would threaten people with bodly harm arrest and holding of the employees paycheck. It is a sad day in this industry that a family owned company was let fail when all the one needed to buy it. I mean the Kansas city location had no running water no real toilet facilities to use even with us sitting right next to the others warehouse that had plenty of office space unused. A mountain of repair bills none of them paid and not a single company wiling to work on the equipment brought this all on in kansas City. The closing of one plant should not of caused this to happened. It can all be laid at the feet of the management in Ohio and the investment company that bought falcon out. As far the drivers the two things noone is talking about are they home now?? how hard is it going tobe to find another job with all the new regulations out about being able to verify past employment history. It already took a month to get one back from falcon now they wont get one at all and most employers now wont even look at your application if they cant verify it. Like I said I qas with falcon during the buyout and felt as if thos was not going to work. The unkeeep promises of repairing replacing of equipment and not doing any of that. 3 weeks behind on payroll forcing the office staff amd drivers to work sick. Even if you where in the hospital you still had to work from there as an office personnel. And if you did not work the threating emails and phone calls would come in. Or the drivers calling you because your the only one who would answer your phone to help them out.

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