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XPO Logistics, Inc. (NYSE: XPO) today announced that it has extended its previously announced tender offer to purchase all of the outstanding shares of common stock of Con-way Inc. ("Con-way") (NYSE: CNW) for $47.60 per share in cash (the...
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Con-way Inc (NYSE: CNW) provides truckload and less-than-truckload shipping services for retail, industrial, and government customers. Con-way's customers typically don't have a full truckload of goods, and the firm consolidates shipments at a central location before sending the goods on the road. Con-way also has a secondary logistics business - managing product transportation, storage, delivery, and other supply-chain details - and while this business is smaller and less profitable than freight, Con-way has grown its presence in this sector by expanding into Asia by acquiring logistics companies in both Singapore and China.

Because Con-way is a nonunion freight carrier, its workers can do several different jobs when they transport goods, differentiating Con-way from their unionized competitors who must hire a separate person to perform each task. This allows Con-way to operate at lower costs and higher margins than its competitors.

Like others in the competitive trucking and logistic industry, Con-way's revenues are closely tied to the overall health of the economy. A decrease in demand of consumer goods means lower trucking demand and a negative impact on Con-way's bottom line. In 2009, the company's net revenues fell 15% due to lower freight volume.[1] Con-way faces additional challenges from fluctuating oil prices and increased government regulations.

Company Overview

Con-way provides a variety of transportation services. The company charges shipping rates, which typically include a fuel surcharge, to transport goods. The transportation and logistics company also makes money by offering supply-chain management and logistics consulting. Con-way operates in over 17 countries, but almost all of its revenue is generated in the United States.

Operating Segments[2]

Con-way's business can be divided into four main operating segments:

  • Freight: With over 460 North American operating locations, Freight provides comprehensive less-than-truckload services throughout the continental U.S. and Canada as well as in Hawaii, Alaska, Puerto Rico, and Mexico. In addition, Con-Way can ship goods for customers from ports located in China, Korea, Singapore, Japan, and Taiwan to U.S. destinations with a day-definite guarantee. Customers pay Con-way for shipments, which typically weigh 100-15,000 pounds. Con-way picks up shipments from customers and consolidates these less-than-truckload shipments at the originating service center. From there, goods are routed to a destination service center, where they are shipped to the final destination. This process is asset-intensive, because Con-way needs to operate several trucks and service facilities. Con-way Freight uses over 8,000 tractors and 24,000 trailers to achieve its 98% on-time performance.
  • Truckload: Using 37 sales centers and over 460 North American operating locations, Con-Way Truckload provides local, regional, and transcontinental truckload transportation services to customers in Canada, the United States, and Mexico. With over 10,000 company-owned tractors and trailers dedicated to truckload services, Con-way can do same-day pick-up and also allow clients access to dry van, intermodal, and flatbed services.
  • Logistics: Menlo Worldwide is the logistics branch of Con-way that provides supply chain management to customers in over 17 countries and span 5 continents. Customers pay Con-way for consulting and/or engineering of supply-chain management. These customers go to Con-way in hopes of reducing costs in transportation, inventory, and order fulfillment. Menlo Worldwide develops, implements, and manages the movement of raw materials to finished goods for businesses. Menlo Worldwide usually utilizes third-party transportation providers for customer's shipping needs.
  • Other: Other includes the subsidiary Road Systems, which manufacturers and refurbishes trailers for Con-way Freight and Con-way Truckload, and any corporate activities that do not fall into any of the prior categories.

Business Growth

FY 2009 (ended December 31, 2009)[1]

  • Net revenue fell 15% to $4.2 billion. The company attributes the loss to the economic environment and competitive industry pricing. Freight revenue declined 14.6%, Logistics revenue declined 11.9%, and Truckload revenue decreased 15.3%.
  • The company reported a net loss of $111 million compared to a net gain of $67 million the year earlier.

Trends and Forces

  • Sensitivity to Economic Conditions: The trucking industry is closely tied to U.S. economic cycles and is particularly vulnerable to fluctuations in the manufacturing and retail sectors. This correlation between economic growth and trucking profits is due to basic supply and demand economics, since customers typically use a bidding system, which tends to keep prices fairly competitive; when shipping volume decreases in a weakening economy with supply held constant, then prices usually decrease. A decrease in demand of consumer goods means lower trucking demand and a negative impact on Con-way's bottom line. In 2009, the company's net revenues fell 15% due to lower freight volume.[1]
  • Government Regulations: Con-way must follow regulations set forth by the US Department of Transportation and Homeland Security, along with the Environmental Protection Agency (EPA). Con-way ships some goods with a guarantee on shipping time. Further restrictions on the industry could potentially disrupt their shipping times and negatively effect business relationships, and the U.S. government's continued response to terrorist threats could lead to more restrictions and guidelines for the transportation industry. In addition, the EPA requires a progressive decrease in diesel truck emissions through 2010 due to environmental concerns. These regulations could lead to higher fuel, trucks, and maintenance expenses. Hours-on-service (HOS) laws govern interstate trucking and regulate the number of hours a truck driver can work. The U.S. Federal Motor Carrier Safety Administration says a worker cannot drive more than 11 hours after being off-duty for 10 hours. Also, a commercial motor vehicle (CMV) driver cannot exceed 60/70 hours in a 7/8 day period.
  • Fuel Expenses: Con-way, along with its peers in the trucking industry, are relatively shielded from changes in fuel prices, because of a generally accepted fuel surcharge system, in which customers agree to pay established shipping rates plus or minus a change in diesel prices. However, if diesel prices continue to increase, it may be harder for the trucking industry to continue its practice of applying the expense to their customers.
  • Con-way's Model depends on a Non-union Workforce: Con-way's business model revolves around the flexibility of its non-union workforce, who can perform a variety of functions in the supply chain. This is different from other transportation companies that are beholden to union regulations that restrict work hours and job functions. If Con-way's workers were to grow discontent and organize into a union, this would lead to new restrictions on the firm's operating model and erode its competitive advantage.


Con-way competes with a range of regional, national, and global transportation and logisitics company.

Transportation of Goods

Con-way's Freight and Truckload divisions compete primarily with FedEx Freight and YRC Worldwide (YRCW). The national LTL freight service has seen consolidation and liquidation, but remains competitive. This part of industry has seen the least growth, but also involves high barrier to entry. Capital expenses needed to build sorting facilities and operate trucks involve substantial capital contribution. At the regional level, Con-way competes with a wide selection of transportation businesses. The larger competitors are Arkansas Best (ABFS), Old Dominion Freight Line (ODFL), and Saia (SAIA), but there are also entities that only own a few trucks and operate as a for-hire contractor. The asset-based model still requires large expenses to operate facilities but less than the national scale. Transportation companies typically compete based on freight prices, service, reliability, transit times, and scope of operations.

AKAIK you've got the asnwer in one!


  1. 1.0 1.1 1.2 CNW 2009 10-K "Selected Financial Data" pg. 15
  2. CNW 2009 10-K "Reporting Segments" pg. 3-5
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