PAM Profit Slides Amid GM Strike

Dan Cushman, the CEO, says P.A.M. is “looking at every possible means to feed and fuel our driver growth.” One element of that is a program that lets Mexican truck drivers with work visas deliver loads to points in the United States, as long as they return to Mexico with a load.

PAM Transportation Services Inc. of Tontitown reported decreases in third-quarter revenue and income Tuesday.

The carrier’s largest customer, General Motors of Detroit, has been in negotiations over a new labor contract with the United Automobile Workers, which has been on strike since mid-September. Experts have said the strike has shut down production and cost GM nearly $2 billion.

It hasn’t helped PAM, either. 

The company (Nasdaq: PTSI) reported operating revenue of $129 million, down from $140.3 million in the same quarter of 2018. Net income was $4.6 million, down from $9.2 million. Earnings per share was 72 cents, down from $1.52 a year ago.

PAM CEO Dan Cushman said he had read other companies’ earnings reports before when those companies’ leaders have spoken of “unusual events” that negatively affected the bottom line. Now, Cushman knows of what they speak.

The strike encompassed about two weeks of the three-month reporting cycle of July, August and September. Cushman said automobile manufacturers typically cut back on shipping in the month of July as plant production is scaled down.

“PAM experienced such an unusual event beginning September 16, 2019 in the form of the United Auto Workers labor strike against General Motors,” Cushman said. “I don’t recall many mentions by others that compare to such a blow as having your largest customer essentially shut down operations without warning.”

Cushman said the company still made a profit in July — and the entire quarter — where in the past PAM has lost money in July. Cushman said the company has been trying to diversify its business to be less reliant on the automobile industry.

For the first three quarters of 2019, PAM’s operating revenue was $390.7 million, down slightly from $395 million a year ago. Net income for the first three quarters was $21.5 million, an increase from the $17.9 million in the same three quarters of 2019.

“I have often been asked if I believe that PAM has the right business model. I believe now more than ever, that the answer is ‘yes,’ ” Cushman said. “I believe that PAM performs exceptionally well in two of the most difficult service offerings in the trucking industry — automotive and cross-border Mexico.”

Cushman said when the strike hit, about 400 PAM drivers were affected so the company decided to be aggressive in reaching to new customers for those drivers. He is optimistic that the strategy will lead to PAM’s growth even after the GM strike ends.

PAM reported its drivers covered 53.8 million miles in the third quarter, down from 56 million miles a year ago. Revenue per truck per week, perhaps the most telling trucking metric, was $3,466, down from $3,846 in the same quarter of 2019.

PAM’s logistics division reported revenue of $17.7 million, down from $24.4 million a year ago.