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U.S. Xpress Sheds Staff: Is Trucking in Trouble?

Trucking’s down market has prompted U.S. Xpress Enterprises Inc. to pare back the focus on its digital fleet as it retools its business strategy with the aim of cutting costs and boosting profitability. 

The Chattanooga, Tenn.-based trucking company, which had a recent market cap of $136.4 million, said this week it will trim its staff to the tune of about $20 million in annualized savings, effective in the fourth quarter, give back underused real estate in some markets, and focus less on its struggling digital fleet called Variant. 

On a call with management Thursday, analysts pressed the company on the different strategies it’s implemented in recent years, ranging from cutting costs to growth and the digital fleet. 

“I would say we really had a strategy since late 2018. It was a single strategy, so I wouldn’t say we’ve changed four times. That strategy we started in 2018 and ran until very recently, where we decided to pivot. And I think the pivot is a couple of reasons,” president and CEO Eric Fuller said during Thursday’s call. “One, some of the things that we did, didn’t work. Some of the things that we did, did work, but are varied from a result standpoint. And then we have this market that is deteriorating and continuing to deteriorate. And that’s also creating some headwinds.” 

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Fuller went on to say the plans announced this week will get the company “back to the basics” and also profitability. 

“Then we can start to build upon that and start to show some improvement and really position ourselves for the next upcycle market and really be lean and mean going into that next cycle,” Fuller said. “But we think that we can weather this cycle and do so profitably. And that’s really our intention at this point.” 

Retooling certain parts of the business also came with new titles and responsibilities for some executives. 

Justin Harness, who oversaw the turnaround of the company’s Dedicated business last year, will now serve as president of the new Highway Services division. Dedicated refers to the deliveries handled by the same drivers to the same customers. Meanwhile, Brandon Danneffel will move from senior vice president of brokerage to president of the Dedicated business, succeeding Harness.

The executive shuffling comes after the company fired Variant president Cameron Ramsdell, according to a Securities & Exchange Commission (SEC) filing in December. In May of this year, U.S. Xpress said in an SEC filing it had terminated chief technology officer Joel Gard. 

The staff cuts disclosed this week, amounting to less than 100 people, are the second round of layoffs for the company as it grapples with trucking’s down market and higher costs in the way of fuel prices and more insurance claims as courts work to clear a backlog of cases stemming from the pandemic. Variant’s performance, in particular, has also continued to lag expectations with driver turnover an issue. 

Variant, started in 2019, focused on using tech in trucks and a Platform called Vector to help with route optimization and load assignments. 

“We saw a big drop in our utility and that drop in utility meant that drivers are making less money. And I think that’s really driven our turnover,” Fuller said. “So we’re really back to focusing on utility. A lot of the things that we were doing from a technology standpoint were designed around driving that utility. For a number of reasons those strategies were not successful and so we’re getting back to the basics from a utility standpoint.” 

U.S. Xpress ended its lease on its Atlanta office, which it said should save $2 million. Additional lease terminations are not being ruled out, although little detail was shared in this week’s call on future real estate plans.  

“On our path forward, as far as the real estate, and what we’re dealing with the remote workforce, we’ll probably be able to get a better update on that on our earnings call,” chief financial officer Eric Peterson told analysts Thursday. “But we do have a couple of facilities—a facility that we are marketing right now for sale, so we’ll have to see what comes with that.” 

Fuller said the company’s main priority is costs and boosting the valuation before it can consider other strategic options. 

“To be fair, we looked at everything and we continue to look at everything,” Fuller said. “We first off believe that this business and this company has a value that we can get back to and we need to do that before we start to talk about what’s next.” 

Fuller said the company has considered “shutting things down,” along with a merger and acquisition deal, among other options. Ultimately, he said “none of it made sense from where we’re at today.” 

The cost cutting efforts are expected to generate about $25 million in total savings. U.S. Xpress’s truck count is expected to remain flat during this restructure.  

U.S. Xpress, founded in 1985, went public in 1994 and then was taken private again in 2007. It made its second go on Wall Street with an initial public offering in 2018. 

The company’s shares were down about 2.2 percent in afternoon trading Friday to $2.65.