NEW OWNERSHIP POSES RISK TO GI TRUCKING WORLDWAY'S SALE COSTS IT PARTNERS

NEW OWNERSHIP POSES RISK TO GI TRUCKING WORLDWAY'S SALE COSTS IT PARTNERS

G.I. Trucking Co. has a new, financially healthier owner. But that could be bad news for the La Mirada, Calif., less-than-truckload carrier, at least in the short term.

The nonunion carrier does about 60 percent of its business interlining freight with the two other carriers that made up troubled WorldWay Corp. - Carolina Freight Carriers Corp. of Cherryville, N.C., and Red Arrow Freight Lines Inc., of Dallas.With the purchase of WorldWay by Arkansas Best Corp. this month, Carolina and Red Arrow will be merged into Arkansas Best's ABF Freight System Inc., which, like them, is a union carrier. That means national ABF will handle their West Coast freight, and it leaves G.I. looking for new partners.

"G.I. will lose virtually all of that business it was getting from Carolina and Red Arrow," said Robert A. Young III, chief executive of Arkansas Best, the Fort Smith, Ark., holding company. He said the lack of an interline partner will hurt GI's eastbound freight as well.

"It will be a large loss. We'll have to downsize GI significantly to offset the loss of revenue," he said. "The key is how quickly we can grow that back."

G.I. had revenue of $137.5 million and net earnings of $3.9 million in 1994, making it the only profitable LTL carrier in the WorldWay family. It had 1,113 employees at the end of last year.

Mr. Young said negotiations are taking place to find Eastern interline partners for G.I. Company officials did not want to comment on their prospects, but an official with another company in the WorldWay family said G.I. had relationships in the past with Merchants Fast Motor Lines Inc. of Abilene, Texas, Averitt Express Inc. of Cookeville, Tenn., and Estes Express Lines of Richmond, Va.

"They do have the ability to float freight from day one," he said.

While the merger of Carolina and Red Arrow into ABF will not take place before next month at the earliest, G.I. is already starting to lose business, as customers are concerned about service from the Eastern WorldWay carriers facing merger.

"We had to scramble and bring other carriers aboard to make sure our service to the East Coast would not suffer any failures," said one shipper, Jim Rogers, the distribution manger for Devon Industries Inc. of Chatsworth, Calif.

Devon, a manufacturer of disposable medical devices, is using two national carriers, Overnite Transportation and CF MotorFreight, for eastbound freight while it continues to use G.I. for West Coast regional freight. Mr. Rogers said G.I.'s regional service has not yet been hurt.

"To date, no, but we're keeping a close eye on it," he said.

Despite the problems the purchase poses for G.I., it also offers great potential. G.I. could end up being the first part of a national network or regional carriers for Arkansas Best, said Mr. Young.

"It certainly could be the nucleus for more than one regional company," said Mr. Young. "If you have two regional companies, sometimes one plus one can equal three because of the interlining you can do between the two.

"I don't know that's the route we'll go," he said. "But that possibility is certainly there. We consider it to be a good asset."

Arkansas Best's competitors have already moved in that direction. The two biggest LTL trucking groups, Consolidated Freightways Inc. and Roadway Services Inc., have put together families of nonunion regional carriers that now provide national coverage.

Yellow Freight Corp. also is trying to build a similar network, but it has limited West Coast coverage and a union carrier, Preston Trucking Company Inc., covering the Northeast.