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Fiscal fatality.

Competitors Profit in Aftermath of 1991 Jones Truck Lines Crash

SPRINGDALE-BASED JONES Truck Lines Inc., which filed for bankruptcy in 1991, is one of the few failure stories in the northwest Arkansas business community.

The demise, however, came long after founder Harvey Jones had sold the company that was founded in 1918 and gave the region one of its first success stories -- and one that still has a philanthropic impact on Springdale. The firm's closing also had a positive impact on other Arkansas-based trucking companies.

Jones had sold the firm in 1979 to Sun Co. for $51.3 million. When the company filed for bankruptcy protection on July 9, 1991, it listed total debts of $103.1 million.

The less-than-truckload (LTL) carrier's chapter 11 reorganization ultimately was converted to chapter 7 liquidation and hundreds of jobs evaporated. For its competitors, the insolvency of the trucking firm was not a bolt out of the blue.

"It was not unexpected, but it is always a surprise when it finally happens," says Robert A. Young III, president of ABF Freight System Inc. in Fort Smith. "Jones was basically a short-haul LTL carrier, but we certainly competed with them in some lanes like Little Rock and Chicago. They had a fine group of employees, and we hired some of them, particular drivers."

The financial woes and ultimate closing of Jones proved to be more of a windfall for another competitor over in Harrison.

"We were definitely impacted more than anyone else," says Sheridan Garrison, chairman and CEO of American Freightways Corp. "We competed head-to-head, we served essentially the same customer base and our territories overlapped.

"We got an overnight deluge simply because we were doing business with some of the same customers."

Total revenues for American Freightways leap-frogged in the years leading up to and following the Jones bankruptcy. During 1989-92, American Freightways reported annual sales of $97.5 million, $142.8 million, $198.3 million and $262 million.

American Freightways' stock price has risen 121 percent with stock splits in February 1992 and May 1993.

In terms of hard assets, American Freightways bought a former Jones terminal in Russellville and hired a dozen or so former Jones employees.

"We came out a winner in this, and none of us want to gloat over that," Garrison says. "Their problems, contrary to popular belief, were not solely management related."

Unbearable Burden

Jones had to compete in a deregulated industry while trying to overcome the structural barriers created by the Teamsters' National Master Freight Agreement.

The inflexible work rules, high wages and generous benefits caused the company's rate structure to be out of line with the free market system. Because of the union contract, the company was forced to compete with a built-in overhead that was higher than many of its competitors.

"That was hard to do because there was nothing to distinguish their service other than a proud history, loyal customers and some good employees," Garrison says.

The enduring Jones legacy is one of philanthropy funded by the company's namesake family, Harvey and Bernice Jones.

Springdale Memorial Hospital and the Springdale School District are among the list of local recipients favored by the Jones' civic-minded goodwill.

Most recently, Bernice Jones facilitated $31 million in bonds for expansion at the hospital. She also bought the former Jones corporate headquarters at an auction and donated it to the hospital for use as an education department, medical library and the Baptist School of Nursing.
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Title Annotation:Jones Truck Lines Inc.
Author:Waldon, George
Publication:Arkansas Business
Date:Oct 18, 1993
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