GMJ CEO says reopening ‘highly doubtful’

| 11/1/2011

Rumors have been flying around about the future of GMJ Co. Inc. as former employees and truck drivers wait for the official word about whether the Kansas-based transportation and warehousing operation would re-emerge after its abrupt shutdown on Oct. 21.

GMJ Chief Executive Officer George Hersh told Land Line on Friday, Oct. 28, that it’s “highly doubtful” that the GMJ companies will re-emerge after their $9 million line of credit was suspended by Kaw Valley Bank in Topeka, KS, on Oct. 21.

“I wish I could tell you there was hope, but it’s highly doubtful,” Hersh said. “I was trying to figure out a way to get financing in place, but they called in our loan and that shut us down. It was unexpected.”

Hersh said he was given a 45-day time frame from his bank, which had expired about five days prior to the shutdown, but that he was currently in negotiations with other banks to secure other financing.

“I kept hearing that other banks were going to need 90 to 120 days to move that big of a line of credit, but they (Kaw Valley) couldn’t wait,” he said. “Maybe they didn’t think I could get this done.”

On Thursday, Oct. 27, Hersh said he worked with Kaw Valley Bank President Gerald Lauder to pay GMJ’s nearly 250 W-2 employees, almost a week after they were supposed to be paid. 

However, the bank chose not to pay the payroll for the 1099 independent contractors, including nearly 60 owner-operators leased to Sports Associated of Kansas City, KS, and O’Neil Relocation, based in Garden City, CA. Sports Associated and O’Neil are the two trucking divisions operated by GMJ. The company also had 700,000 square feet of warehouse space in various U.S. locations.

Lauder told Land Line that while he feels bad for the contractors who didn’t get paid, it isn’t the bank’s responsibility to front the money for payroll for any of the workers, including the independent contractors. 

“We are just trying to preserve the collectability of the remaining accounts receivables,” Lauder said.

Hersh confirmed that GMJ has not filed for bankruptcy protection at this time, but he has met with an attorney to discuss his options going forward.

“I really never thought about going into it (bankruptcy protection). I am not that kind of guy, so I am not prepared for it,” he said. “This may be something we have to do eventually, but the official line is that we are basically trying to shut everything down.”

One OOIDA member, Daniel Fattig of St. Joseph, MO, was an owner-operator who was leased to Sports Associated. He hasn’t been paid for two weeks now.

“I don’t understand how the bank can agree to pay some people and not others,” he said. “We (the drivers) all worked hard to get freight delivered to our customers that we have built these relationships with,” Fattig said. “We did this out of loyalty to the company, our customers, to our dispatchers. But all the bank cares about is collecting the receivables, not that some drivers have families and haven’t been paid.”

In the past few months, Hersh said GMJ had put a plan in place to try to make its way out of a bad economy.”

“We are not a perfect company, trust me, but we had kept things afloat and were digging our way out of this recession,” he said.

At this point, Lauder said that Kaw Valley isn’t “controlling the purse strings,” but does have a security interest in the accounts receivables.

“We had made efforts previously to encourage the company to wind this down in an orderly fashion … but unfortunately they were unable to find that,” he said.

Hersh said in his 30-plus years in business, this is the first time he has been unable to pay his truckers what they are owed. 

“I think the bank not agreeing to fund the owner-operators’ payroll is what’s killing me more than anything else,” he said. “I think I had a fantastic group of people, and we gave it our best shot.”