News / Struggling Forward Air sharpens its job axe again in bid to cut costs

Photo: Forward Air

Forward Air has embarked on another round of job cuts as management tries to develop a more solid footing for the struggling company.

According to reports citing sources inside the company, the firm is parting with more than 150 employees, ranging from clerical staff to the c-suite – a cull allegedly affecting many positions in sales and technology.

Forward Air has confirmed it was “initiating workforce changes through restructuring and reductions”, as it tries to improve its performance.

The company eliminated more than 200 employee positions between December and February and Forward has struggled since its agreement to merge with Omni Logistics last August.

The deal, which closed in January, was attacked by shareholders worried about the valuation of Omni and the increased debt level, as Forward went on to absorb $1.4bn of debt Omni had piled up. And freight forwarder customers of the trucking firm were worried about the possible ramifications of Forward merging with one of their competitors, potentially giving Omni preferential access to capacity and passing on commercial information to the newly acquired logistics arm.

The turmoil resulted in an ungainly slalom that saw Forward trying to back out of the deal, then being sued by Omni to force it to stick to its commitment. It also resulted in change at the top: Forward chairman and CEO Tom Schmitt, the architect of the merger, left the company within weeks of the deal closing.

The company’s financial position took a beating. For the first quarter, management posted a net loss of $88.8m.

Many shareholders that had opposed the merger remain bitter about the ensuing plunge in Forward’s share value, from a high of $125 in January 2022, all the way to $11.21, before rebounding above $20. On Tuesday, it closed at $20.98.

On 12 June, S&P Global downgraded Forward’s debt rating to B, as it saw the ratio of funds from operations to debt slide to 8%. And S&P’s analysts expressed scepticism about Forward’s outlook.

“Ongoing weakness in the freight industry is contributing to weaker-than-expected performance across all of Forward Air Corp’s operating segments,” they wrote. “In addition, we believe the company faces execution challenges associated with cost-savings initiatives and its Omni integration, which pose further downside risk to credit measures and liquidity.”

Some shareholders mounted a last-ditch challenge to the Omni integration with a class action lawsuit in May, arguing that the company ought to have called a vote on the transaction, an argument management contested. Earlier this month, shareholders approved the conversion of preferred shares to Omni shareholders to give them 35% of the voting stock in the amalgamated firm.

With this out of the way, the new management hopes it can finally focus on efforts to raise Forward’s performance. After the presentation of the first-quarter results Shawn Stewart, the new CEO, expressed his commitment “to aggressively taking action to improve profitability, maximise synergy capture and drive our leadership in global supply chain and domestic transportation services”.

His leeway to do so, however, is limited by Forward’s debt burden, which crimps the ability to raise cash for new investment. As The Loadstar noted this month, the company is also unlikely to get fair value for assets it seeks to divest, as competitors are aware of its financial situation and likely to take advantage of its need for funds.

With the trucking market still in the doldrums, this makes cost-cutting a highly likely road to take in the quest to improve Forward’s finances. Moreover, management must be eager to trim any redundancies created by the Omni marriage.

You can read all The Loadstar’s coverage of Forward Air here