Five years after buying UPS’s freight business, TFI is struggling to turn it around

TFI International Inc. TFII-T bought United Parcel Service’s freight business five years ago for US$800-million, betting it could revive the neglected unit and drive it to healthy profitability.

Now, Canada’s biggest trucking company is finding the task a lot harder than it first thought. The situation is testing investors’ patience and exposing the risks of acquisitions, which have fuelled TFI’s growth over nearly two decades.

Despite a strong performance in certain segments of its operations, TFI reported third-quarter earnings that fell short of analyst estimates Friday and introduced a financial forecast for the fourth quarter that was softer than expected. Its shares tumbled 17 per cent to close at $130.05 on the Toronto Stock Exchange.

The big culprit? The company’s U.S. less-than-truckload business, largely made up of the assets it bought from UPS in 2021, now known as TForce Freight. The unit’s operating income dropped by 43 per cent during the quarter, made worse by high fuel costs.

Less-than-truckload transport, or LTL, means shipments that are too big for standard parcel services but don’t require a full flatbed trailer. They’re typically carried on pallets. One truck can carry several pallets from different customers, whether it be an auto supplier sending parts to an assembly plant or a distributor sending dry food to a local grocer.

When TFI bought UPS Freight, chief executive Alain Bédard said the business never received the attention it deserved from its parent company, given UPS’s focus on global package delivery rather than bigger shipments. “This is like a rock in their shoe,” he said at the time.

Today, that rock has become his headache. One big problem in the U.S. for the company is density. Not only do TFI’s LTL trucks have to drive longer between pickups and deliveries than in Canada, but their cargo is also too light on average, which affects the cost per shipment, Mr. Bédard said. He said the company is now trying to push for more industrial freight, which is heavier.

TForce Freight does 20,000 shipments per day. In its most recent quarter, it generated an operating profit of barely US$44-million on US$882-million of revenue. Industry conditions overall remain a bit soft, but key rivals are posting much better operating ratios, Mr. Bédard said.

Internal issues lie at the heart of the trouble.

The CEO, known for his blunt language, has bemoaned the corporate culture TForce Freight inherited from UPS again and again on past calls with analysts, saying some of its practices are “stupid” and comparing its inefficient operations to “a bunch of fat cows.”

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On Friday’s call, he said the unit had been improving its service and on-time delivery going into 2026, but then faltered again when it tried to add more volume. He called the first nine months of the year “disastrous,” using a profanity.

In sum, he says the business lacks the competitive instinct and urgency required to make money. The previous owner did not invest in the business and “did not care,” which rubbed off on the work force, he said Friday. The fixes his TFI team has tried so far, such as adding new trucks, trailers and technology, have yet to deliver lasting improvements.

“We did everything that is possible to do and we don’t have the results,” Mr. Bédard told analysts on a conference call Friday. “Now we’re attacking the human side of it … We have the wrong guys.”

TFI will soon announce the nomination of a new executive to lead the TForce Freight business, someone who previously worked for a competitor and whom they convinced to come out of retirement, Mr. Bédard said. He said plans are also afoot to replace lower-level management.

“If you’re sitting on your hands, we don’t need you,” the CEO warned. “This is where we’re at now. I mean, we’ve got too many of those service managers, or that day-to-day team, that accepts things that are completely unacceptable.”

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Mr. Bédard has turned what was once a regional player into one of North America’s biggest trucking companies, expanding its footprint as an industry consolidator through 142 acquisitions in the U.S., Canada and Mexico since 2008. As of August last year, TFI controlled some 95 operating subsidiaries, including Clarke Transport, Loomis Express and Besner.

Mr. Bédard said he’d be open to making another acquisition in the less-than-truckload space if he felt it could improve the overall business. But he said the plan for now is to build a non-unionized, asset-light operation in parallel to its existing network to generate more stability.

Moving toward a freight brokerage model – as a middleman between shippers and carriers – makes sense because it means lower capital expenditure, said Peter Stefanovich, president and owner of Left Lane Associates, a supply chain mergers and acquisitions advisory firm based in Toronto.

“This just allows them to sort of shift capacity,” he said. “It might over time diminish the reliance on the assets.”

TFI shareholders are “bound to be frustrated” by the ongoing underperformance in the LTL segment, National Bank of Canada analyst Cameron Doersken said in a research note.

“We suspect investors will need to see sustained multi-quarter improvement before gaining confidence” that the business is truly on a path to higher earnings, he said.