Photo: Timothy Dooner/FreightWaves
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.