Former drivers of Midwest Transport Inc. (MTI) have confirmed that while they received their final paychecks, the company did not provide severance pay following its abrupt shutdown. This closure has sent ripples through the transportation industry, leaving many questioning the factors leading to the demise of Midwest Transport Inc., a significant player in freight transport.
MTI, which operated terminals across several states including Illinois, Pennsylvania, Tennessee, and Florida, did not issue WARN Act notices in those states prior to ceasing operations. The WARN Act typically requires employers to provide 60-day advance notice of plant closings and mass layoffs. While exceptions exist for unforeseen business circumstances, the sudden nature of the Midwest Transport Inc. shutdown raises questions about its planning and communication with its workforce.
FreightWaves’ attempts to reach Joy Wernz, CEO of Midwest Transport Inc., for comment on the reasons behind the closure have been unsuccessful as of Friday. Before its closure, Midwest Transport Inc. employed over 480 drivers and operated 428 power units, according to the Federal Motor Carrier Safety Administration (FMCSA). This scale of operation underscores the significant impact of Midwest Transport Inc.’s absence from the freight market.
Subcontractor Faces $1.3 Million Loss After Midwest Transport Inc. Shuts Doors
Adding to the financial fallout, a subcontractor agent who worked closely with Midwest Transport Inc. on highway contract routes (HCRs) for nearly three years claims the trucking company owes his company over $1.3 million. This broker, who requested anonymity due to fear of retaliation, stated he was aware of Midwest Transport Inc.’s financial difficulties and was not surprised by the closure announcement.
The subcontractor alleges that Midwest Transport Inc. had recently agreed to a $40,000-per-week payment plan to address the outstanding debt. “MTI paid the first payment of our agreement but announced it was shutting down when the second $40,000 payment was due, so we are out a lot of money,” the broker told FreightWaves, highlighting the devastating financial impact of the Midwest Transport Inc. shutdown on its partners.
Postal Service Policy Changes Possibly Contributed to Midwest Transport Inc. Demise
Industry insiders suggest that changes in the Postal Service’s contracting practices may have contributed to the financial strain on Midwest Transport Inc. In October 2021, the Postal Service introduced Freight Auction (FA), a system for soliciting bids for mail transportation on an “as needed” basis. This initiative aimed to introduce flexibility and potentially reduce costs.
Midwest Transport Inc., which held numerous highway contract routes with the Postal Service, reportedly subcontracted with brokers for these freight auction contracts to manage capacity fluctuations. However, a subsequent audit by the Postal Service’s Office of Inspector General (OIG) in August revealed significant issues with the Freight Auction program. The audit estimated over $199 million in “questioned costs” due to inadequate controls within the program.
The OIG audit detailed inconsistencies in FA policy application, weak safeguards in bid and award processes, lack of control over payments and delivery documentation, ineffective system controls against inaccurate payments, insufficient supplier performance monitoring, and non-compliance with Service Contract Act requirements. According to the MTI subcontractor, “The Postal Service realized they were overpaying contractors and started canceling contracts, which led to financial losses at Midwest Transport and other companies closing facilities or shutting down.” This perspective suggests that shifts in Postal Service contracts created significant financial headwinds for Midwest Transport Inc.
Safety Record of Midwest Transport Inc. Before Closure
Prior to its closure, Midwest Transport Inc.’s safety record showed 21 injuries and 42 tow-aways in the preceding 24 months. FMCSA data indicates that Midwest Transport Inc. trucks underwent 244 inspections, with 65 placed out of service, resulting in a 27% out-of-service rate over two years. This is notably higher than the national industry average of approximately 22%.
Conversely, Midwest Transport Inc. drivers had a lower out-of-service rate. Out of 564 driver inspections, 16 resulted in drivers being placed out of service (around 3%), which is less than half the national average of 7%. SAFER database records show Midwest Transport Inc. received acute/critical violations related to controlled substances/alcohol and driver fitness.
The future of Midwest Transport Inc. remains uncertain. While rumors circulate among former employees about a potential bankruptcy filing, no such filing had been made as of Friday afternoon. The abrupt closure of Midwest Transport Inc. serves as a stark reminder of the volatile nature of the freight industry and the challenges faced by trucking companies in a rapidly changing economic and regulatory landscape.
Do you have information related to the Midwest Transport Inc. closure? Contact Clarissa Hawes at email or via X (Twitter) at @cage_writer. Anonymity is guaranteed.
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