PRESTON CORPORATION History

Address:

151 Easton Boulevard
Preston, Maryland 21655
U.S.A.

Telephone: (410) 673-7151
Fax: (800) 551-7737, ext. 316

Public Company
Incorporated: 1932 as Preston Trucking, Inc.
Employees: 9,201
Sales: $564 million
Stock Exchanges: New York

Company History:

The Preston Corporation is a holding company for three trucking lines: Preston Trucking Company, Saia Motor Freight Line, Inc., and Smalley Transportation Company, which together provide long- and short-haul freight transportation services throughout the eastern United States. The company boasts high productivity and a solid relationship with its unionized work force as a result of its belief in the importance of management cooperating with employees.

Preston Trucking got its start in 1932, when Albert W. Sisk and Sons, a canned goods wholesaler based in Preston, Maryland, experienced difficulty using rail transport to ship small quantities of its products. One of the firm's accountants, A. T. Blades, suggested that the company create its own transportation division. Blades then received a $500 loan from his employer and was put in charge of the fledgling enterprise.

Incorporating Preston Trucking in August of 1932, Blades set out to build a trucking service that would haul small, irregular loads, or 'less than truckload lots,' abbreviated in the industry as LTL. He embarked on this task within a newly regulated business environment: the federal government had responded to the economic breakdown of the Great Depression by imposing order on certain key industries. Truckers were restricted to working the routes allotted to them by the government through a certificate system, and rates were fixed.

In 1936 the country remained locked in the Depression, and Preston Trucking revenues had not yet reached six figures. Nevertheless, the company set up its own offices. Around this time Preston Trucking also acquired its motto, 'The 151 Line,' when employees counted the company vehicles to come up with the slogan '151 pieces of equipment to serve you.' By 1942 things were looking up, and Preston paid the first cash dividend on its stock.

Preston continued to grow steadily throughout the 1950s and 1960s. In 1968 the company acquired the O. K. Heilman Trucking Company, which extended Preston's network of routes west into northwestern Pennsylvania and Ohio. In the same year, Preston Trucking suffered a setback when its general administrative offices in Preston, Maryland, burned to the ground in a late-night fire. In the wake of the fire, part of the home office staff was displaced to temporary quarters nearby so the company could rebuild.

In 1972 Preston ran into trouble with the newly empowered federal Equal Employment Opportunity Commission, when it charged the company with discrimination against blacks and women in recruitment, hiring, classification, transfer, and promotion practices. The government alleged that the company used unfair tests and worded help-wanted advertisements in such a way as to exclude women and blacks from its hiring.

In 1973 Preston bought Kirby Transfer & Storage, and later that year, the company was given permission by the Interstate Commerce Commission (ICC), which regulated the trucking industry, to acquire the American Transfer Company. Early in the following year Preston purchased a portion of the operating rights of Export S/D/Z, Inc. These acquisitions, along with the addition of the Southern Maryland Transportation Company, enabled Preston to augment its inter and intrastate traffic in Maryland, Pennsylvania, and New York.

In September of 1975 this pattern of growth through the purchase of other shippers was continued when Preston agreed to merge with its largest takeover target yet, Shippers Dispatch, a South Bend, Indiana, trucking company. This addition doubled the company's service area; Preston now began operations in Ohio, Michigan, Indiana, Illinois, and Missouri. The merger was completed through a stock swap in the following year, making Preston the nation's twentieth largest trucking company, with revenues of more than $100 million a year.

Despite this steady growth, Preston suffered the consequences of friction between its supervisors and its unionized work force, which by 1978 had come to a head. In the summer of that year a Preston trucker in Detroit staged a one-man wildcat strike to protest new work rules that the company had recently imposed, refusing to move his truck from the parking lot of a Chrysler plant for two hours. This gesture was followed by a series of work slowdowns and a three-week retaliatory company lockout of two-thirds of the Detroit workers.

Faced with a disgruntled work force, Preston's management decided to reexamine the company's operating philosophy, in hopes of increasing its chances for survival in the coming era of deregulation that was scheduled to take effect in 1981. In 1979 the company hired a management consulting firm to conduct a survey of employee attitudes at its Detroit and York, Pennsylvania, freight terminals and to advise it on how to declare a truce in the ongoing guerilla war between supervisors and workers. Implementing policies designed to empower individual workers with such slogans as 'the person doing the job knows more about it than anyone else,' Preston was able to increase its productivity and decrease its level of worker dissatisfaction. Employees were renamed 'associates,' and supervisors became 'coordinators.' Frequent meetings between labor and management were conducted, and workers were encouraged to suggest improvements in procedures.

Preston's efforts at change came as the trucking industry entered a recession that would leave hundreds of cartiers defunct. This shakeout was caused in part by the deregulation of the trucking industry sparked by the Motor Cartier Act of 1980, which went into effect in 1981. Where previously all freight lines had charged the same rates, and territory was carefully parceled out by the government, new companies could now invade an established trucker's territory, undercutting the competition by offering rock-bottom rates. In the wake of deregulation, Preston positioned itself for competitive operations in the future by petitioning the ICC for the right to operate in all 50 states, and the company's request was approved.

Preston managed to avoid losses throughout this time. In 1980 the company formed a subsidiary, Pioneer Transportation Systems, Inc., to haul full truckloads of freight, as opposed to the LTL lots carried by the main line. In this year Preston recorded a profit of $5.26 million.

With the freedom that deregulation brought, Preston inaugurated several new types of service. Using its traditional operating area of the northeast as a base, the company introduced 'Gold Rush' service to California and Nevada and, pushing beyond the shores of the continental United States, began shipping goods to Puerto Rico and the Caribbean under the name 'Velero.' Also adding 'Transocean' service, which expanded Preston's reach to Europe, the company now possessed 78 freight terminals, served by 4,000 employees.

With this growth, Preston's net earnings reached $6.3 million in 1981. The following year, as Preston celebrated its fiftieth anniversary, revenues exceeded $200 million, and the company became the United States' ninth-largest trucker, based on profits. Growing to $5.5 million in the first nine months of 1983, profits increased by one-third over 1982 levels.

In December 1983 workers ratified another aspect of the company's shift in managerial emphasis and voted in the trucking industry's first system of pay bonuses to reward productivity. At the end of the month the company reorganized its corporate structure, setting up a holding company called Preston Corporation, Inc., to be the corporate parent of Preston Trucking Company and other, future acquisitions.

In 1984, with the economy looking robust, Preston tried to resist pressure to lower its prices to remain competitive and set itself up as a rate leader within the industry. The company kept its prices two to three percent higher than those of its rivals for the first half of 1985, before deciding that it was losing too much business and pronouncing its experiment a failure. Lower rates in the last quarter of the year helped to restore some of the trucker's business, which also suffered because of a decline in punctuality; the company's on-time delivery rate had fallen to 83 percent.

Despite these difficulties, which culminated in a money-losing fourth quarter, Preston also purchased two companies in 1985. It added Reeves Transportation, a carpet hauler based in Georgia, in April, and Smalley Transportation, of Tampa, Florida, in August. Smalley provided local distribution in Florida for goods carried down the coast by Preston. These two purchases were part of Preston's long-term strategy to add companies in growth markets it did not already serve. For the short term, however, the company's leadership, in light of fluctuating revenues, vowed to concentrate on attaining greater freight density in the geographic areas already served, rather than establishing routes further afield, and to make Preston a service-oriented carrier.

By 1986 Preston's business had rebounded, and the company was predicting profits twice as high as those of the previous year. As a result of its aggressive pricing, the company's volume of business grew dramatically. The demise of a competing interstate carrier, Hall's Motor Transit Company, in March 1986 also gave the company a big boost. Discounted freight rates, increased costs--due in part to the need to hire and train new workers--and lower efficiency, however, combined to hamper profitability. Despite these setbacks, and the company's failure to implement up-to-date computer systems in a timely fashion, Preston was rewarded for its long-term efforts at management reform in 1986, when the company won the U.S. Senate Productivity Award.

Preston's string of acquisitions continued in October 1986, when it acquired for $5 million Bowie Hall Trucking, a Maryland enterprise that specialized in carrying beverages and included among its customers Anheuser-Busch. Three months later the company made a much larger purchase, adding Saia Motor Freight Line, Inc., of Houma, Louisiana, to its corporate family for $62 million. Hailed by analysts as a smart buy, Saia hauled less-than-truckload freight throughout the Southeast and the energy belt, including Texas, Arkansas, and Oklahoma.

In 1987 Preston's carpet-hauling subsidiary, Reeves Transportation Company, bought Carpet Services, Inc., and four affiliated companies, consolidating Preston's holdings in this area. Also that year, in an effort to cap ever-growing health insurance-related expenses, the company announced a controversial policy of limiting insurance benefits for employees stricken with acquired immune deficiency syndrome (AIDS).

In 1989 Preston took steps to ward off an unwanted merger or purchase of the company. At the start of 1990 the company consolidated its Bowie Hall Trucking subsidiary into another unit of the company, Pioneer Transportation System. Faced with continued declining revenues throughout the year, due in part to the poor economy of the northeast region, Preston shut down its Reeves Transportation and Pioneer Transportation operating units in late 1990, taking a 17.8 million loss. Overall, the company lost $18.7 million for the year.

Difficult economic conditions continued in 1991, and Preston was forced to curtail the long-haul business of its subsidiary, Smalley Transportation. In addition, the company reorganized its flagship carrier, Preston Trucking, into two regional overnight carriers, one serving the middle Atlantic and New England region, and the other serving the central states. To add to the gains in productivity this brought, the trucker attempted to suppress skyrocketing health care costs by restructuring its insurance programs and emphasizing safe working conditions. Nevertheless, Preston ended the year once again in the red.

In an effort to regain profitability, the company raised its rates by 5.5 percent at the start of 1992 and continued to concentrate heavily on making its overnight short-haul freight business efficient and profitable. By the end of the first quarter, these efforts were beginning to be rewarded with small gains in income.

Principal Subsidiaries: Preston Trucking Company; Smalley Transportation Company; Saia Motor Freight Line.

PRESTON CORPORATION History

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