Quality Drive Away - Why They Restructured

As midnight, January 1^st brought cheers of “Happy New Year” from around the world, it also brought new life to a local icon in the world of RV Transport.

Quality Drive Away, Inc. announced a restructuring of the two companies, including Baker Transport out of Fitzgerald, GA, that would change leadership and segregate duties. As of January 1^st, 2011 Quality Drive Away will encompass the motorized freight while a new entity, Foremost Transport, Inc will encompass all other freight (see article in RV Business).

In most circumstances, there are three reasons for such a restructuring:

1. Legal (regulatory, shielding liability… etc)
2. Accounting (taxes, financing…etc)
3. Succession Planning
   

Because I am not close enough to the President of QDA, Devon Bechtel to have direct knowledge of the third option, I will remove that from the discussion.

However, the first two present good reason for such a change with the aspect of the first, legal, being the most likely. Accounting may have some traction, but because of the way the different business segments are being combined and segregated, and because tax laws are not changing much, the effort involved in such an undertaking wouldn’t appear to be justified by such a thing.

“How would the legal aspects benefit?” one might ask.

Separation of assets for liability reasons is something that occurs on a regular basis. Many companies separate one company into separate wholly owned businesses for just this reason, separating the property and leasing it to the manufacturing company, separating the sales and warranty and charging a fee to the operations company, separating departments that are feeders to operations and turning them into regular vendor companies… and the list goes on.

Another liability answer might be how separation of the entities would lower insurance costs for one of the two companies, as one may have a better loss history than the other. With as many drivers as they have, it would seem reasonable that they could save enough on insurance to make this a worth-while project.

Finally, let’s look at regulations as a driving force behind the change.

The new CSA 2010 regulations have generated a wide range of reaction by freight companies - everything from redesigning the safety, compliance and training aspects of companies to doing absolutely nothing. Because this is the single greatest aspect that has changed in the industry over the last year, this should be considered as a front-runner.

To start, let’s look at the public records of the current rating of QDA. This can be done by:

1. Visiting http://www.safersys.org/CompanySnapshot.aspx, entering their company name
2. Clicking Search, then click on their name, which brings up information on them
3. Click in the upper right hand side on the words “SMS Results”
4. Now you have an overview of their SMS (Safety Measurement System)

What you will find is their score by category. At the time of this writing there were three categories of the status “Alert”. According to the website this is defined as,

“Denotes this carrier exceeds the FMCSA established intervention threshold relative to its safety event grouping and/or has been cited with one or more serious violations within the past 12 months. Therefore, this carrier may be prioritized for an intervention action and roadside inspection. “

… And also as,

“Exceeds the established Intervention Threshold to be prioritized for intervention“

Looking into the details, the violations in the three “Alert” categories can be summarized as follows:

New Comp	Type		Quantity				Total Quantity	Severity /Weight
Quality	Bus Count	91
Quality	Motor Coach Count	7
Quality	Other Count	6
Quality	Passenger Van Count			1
Quality	School Bus Count	31					136	10.75
Foremost	Straight Truck Count				280
Foremost	Truck Tractor Count					213	493	17.94
	Grand Count					629	629	16.39

Further, based on the information filed about the number of power units (towable) versus the number of just drivers (motorized); it appears to be about a split between the two. This indicates that approximately one half of the drivers (with equipment) are generating almost 500 of the 629 violations reported in the three “Alert” areas.

This leads to the conclusion that the motorized department(s) generate fewer violations than the towable department(s). Further, this also validates a justification for separating the departments / business segments into distinct entities to shield one from the other when it comes to CSA 2010.

Looking at the press release in RV Business one can also see that the General Manager of the new towables company will be Matt Grierson, who was previously in the safety department. You can bet there will be a focus on safety and compliance with him leading the ship (at least one would think).

If I was a betting person, I would say that the restructuring is a direct result of CSA 2010. There are many companies doing nothing at all and hoping for the best. If this truly is the reason for the restructuring it appears to be a good move to isolate the issues to better measure results. All-in-all, it's a good move... IF it has anything to do with the restructuring, that is.

But then again, this is all speculation based on the only information I could get my hands on… I may be completely wrong.

What do you think?