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Is this the end for Eddie Stobart's trucks?
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Soldato
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I think any current share holders are screwed, being at the back of a long queue for anything. Looks like a badly executed move out of their core business has doomed the company.
On the plus side, Tesco, Amazon and other customers aren't going anywhere, so whoever picks up those contracts is going to need drivers and we keep hearing there is a shortage of drivers in the industry.
Paging @Scania who used to work for stobart.
On the plus side, Tesco, Amazon and other customers aren't going anywhere, so whoever picks up those contracts is going to need drivers and we keep hearing there is a shortage of drivers in the industry.
Paging @Scania who used to work for stobart.
Tesco are a large part of the problem
Soldato
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In what way ? Slow payments or contracted price is so low that Stobart can't turn a profit on it ?
Thats very doubtful
Contracted price is low and Tesco won't accept any rate increases (because they obviously can't afford to eat the increase, and won't want to pass it on to customers), Stobart can't easily drop the Tesco contract though due the size/value of it.
Why is so hard to believe?
Why is that necessarily Tesco's fault? It's not their business to prop up other businesses. Why didn't Stobart negotiate a better contract from the beginning?
Tbh that happens in a lot of industries though.
Take private healthcare for example, private health companies don't make a great deal of money on NHS contracts. They do it because it's almost an absolute guarantee of work. If the money from NHS contracts is enough to pay the business rates, pay the staff and keep the lights on, then they focus on other work to bring in a profit.
I see the same point with Stobart.
It maybe was a good contract in the beginning but labor and fuel prices have increased over time. When the contract has been renewed, it's maybe been more difficult to get a good deal, and they are reluctant to drop such a large contract as it would potentially cause large scale lay offs etc.
Edit:
No Tesco shouldn't be forced to prop up Stobart - Stobart shouldn't have put all their eggs in one basket so to speak.
Soldato
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We regularly put our contractors out of business, because we're the biggest client in the country so they can't afford to turn us down, but our negotiators force absolute rock-bottom prices and apply mercenary scrutiny when it comes to denying payment.
Stobart have expanded massively as a result of the Tesco contract - and pull for other retail chains as a result - how are they the problem?
Tesco only renewed the ESL contract a few months back, when the poor financial situation was already established in the media, I don’t think for one second they’d have entertained the prospect had they not been certain that all was not as the media is portraying.
I suspect the contract was signed in full knowledge that by 2020 a very different - and debt free through administration - reincarnation of ESL would be running the show.
Or are Tesco really naive enough to sign a new distribution contract with a supposedly failing company just prior to their crucial peak season?
This has been coming for a long time, inept middle management and planners, unnecessary acquisitions, sell offs and licensing deals to use the brand etc etc
As I say, I don’t think ESL are going to disappear, I think they will go into administration only to re-appear as a slightly different but debt free operation probably backed by either Andrew Tinkler the former CEO of Stobart Group (who are shareholders of ESL but a separate and profitable entity) or William Stobart, who currently runs his own transport business which conveniently has trailers built up the same specification as ESL ones to carry Tesco stock cages....
It’s interesting that they are still recruiting and in the middle of a huge fleet and trailer replacement program - not usual signs of a cash strapped failing concern tbh - a lot of smoke & mirrors going on but I don’t think this is the end by any stretch of the imagination.
Tesco have their own pressures - they are struggling to compete with the discounters (Aldi, Lidl). Perhaps "large part" was overstating it, but they are a part of the problem.
Who else even has the capacity to pick up such a contract before Christmas? The haulier I work for certainly don't have any capacity at this time of year, and we are one of the larger UK hauliers.
Agreed
It will be interesting to see what does actually happen going forward.
Sounds like a nice place to work...
Actually the Tesco contract is what gives Stobart such a competitive advantage, by on many runs wiping out “empty running” meaning they could do their “factory gate - ie manufacturer” load from the likes of Proctor & Gamble, Nestle, Coke etc to a Tesco RDC, once the trailer was empty the driver fitted the internal bars which enabled it to be loaded with cages then went round to despatch and picked up a store delivery to do on the way back to base (a load which most other hauliers don’t get so they have to factor the cost of the empty miles into the initial load) once the store delivery is done the trailer gets filled with empty cages which they get paid for that load as well, so in some instances they could get 3 payments for a vehicle doing a factory gate load that would return their competitors one payment if you see what I mean.
They do the same with Amazon, they’ll take a trailer full of stock in and then take a load for one of their other fulfilment centres out.
Soldato
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Well, customers demanded that we keep their bills down... which means going with the lowest bidders, which means contractors who will dutifully bend over and grab their ankles when we tender out... and since they can't afford lube for when we brief work to them, when the regulator changes our minds for us and we have to pull out they will end up raw and bleeding.
That's the family-friendly version of it, anyway...
Now the contractors could just hope that enough private individuals hire them, to do work in their back gardens for a few quid, to keep them afloat... or they can accept a £12m contract off us. It's not a nice place to work, knowing that every contractor hates you, but at least there is some semblance of assurance that there will still be a job next week.
Most of them could find contracts with other clients of our ilk, but whichever one of us they choose they'd have to turn down work from all the others and that leaves them utterly screwed if the chosen contract goes rancid... and I would assume it's like that for a lot of contractors. Maybe not ESL so much, but few would be in a position to command a particularly good deal.
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Soldato
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Well, you could always nationalise them...
My own industry was so freakin' awesome under nationalisation that the fall in service levels under two Labour governments meant it required a £30 Billion investment in capex just to meet basic European quality standards. That's about £126 Billion in today's money.
That's just one utility. Presumably you're happy to multiply all that **** up and then pay that in your increased taxes, yes?
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