Michael Kaine told Owner Driver the many circumstances that led to Scott’s collapse and is providing ways of ensuring this isn’t repeated in the transport industry
In an opinion piece published on Owner Driver, the Transport Workers’ Union (TWU) National Secretary Michael Kaine has reflected on the unfortunate circumstances that led to the demise of transport logistics giant Scott’s Refrigerated Logistics.
In the piece, Kaine says the debacle is a stark example of how super tight margins are unsustainable and serves as a wake-up call for the federal parliament to urgently pass reform.
“In the blink of an eye, 1500 transport workers, including hundreds of subcontractor owner-drivers and small fleet operators, lost their income – the only source of income many of them had,” Kaine says in Owner Driver.
Kaine says the TWU has heard from two small fleet owners, each with around $200,000 owing for work that had been completed prior to the collapse.
He says one had to pull trucks out of the mechanics because he could no longer pay the repair bill, while another had to return a leased truck of which he would be unable to make repayments.
“Truck drivers and their families have been forced to come to terms with sky-high debts and bills in the current cost-of-living crisis with no assurance of an incoming pay cheque,” Kaine says.
“Once again, subcontractors are the worst affected. Employees will at least have the option to apply for the government’s Fair Entitlements Guarantee scheme to recoup redundancy payments and other entitlements. But those left with the burden of ongoing operating costs have no such relief.
“This is a shattering event and I want to encourage anyone who needs professional help to seek it from services such as Lifeline, Beyond Blue or specialised truck driver helpline 1300 Driver.”
Kaine says contractors seeking work should contact the TWU to receive support.
“We know that this was not a tragic one-off down to poor management or an unfortunate blip. This was an operator collapsing under the pressure of an industry in crisis,” Kaine says.
“The catastrophic state of Scott’s finances has now come to light, and it is horrifying reading.”
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Kaine says in 2021, immediately before Scott’s was bought by a private equity firm, it had annual revenue exceeding half a billion dollars. Despite that, it made a $7.3 million loss.
He says when an operator can’t make a profit on half a billion in revenue, its razor-thin margins were clearly unsustainable. Margins that allowed wealthy retailers and manufacturers squeezing transport contracts to make bumper profits while the operator sunk into $50 million worth of debt.
This was confirmed at the first creditors meeting. Administrators listed the main reasons for the operator’s collapse, with a leading cause identified as “uncommercial customer arrangements as a result of intense market competition”.
“Scott’s couldn’t turn a profit despite being Australia’s largest operator in cold chain logistics with clients including Coles, Aldi, Saputo, Primo, Hans, Lite n Easy, and Streets Ice cream,” Kaine says.
“The only way to stop this is for wealthy supply chain clients to be accountable for fair, safe and sustainable transport contracts which ensure every participant at every level of the chain is fairly remunerated and can work under safe, sustainable conditions.”
On Tuesday, March 7, Kaine says hundreds of transport workers took the fight to those clients, serving a claim on the 40 largest retailers, manufacturers and agricultural companies to take responsibility for their supply chains.
The claim called on the clients to sign up to six core principles and arrange a meeting with the union to work towards a charter to implement them. The principles included: safety and fairness throughout supply chains; transparency over contract arrangements; a voice for transport workers to speak out and be heard; consultation with transport operators and drivers on anything which affects them; a commitment to lift industry standards and remove any financial incentives or pressures which cause risks to be taken; and a disaster preparedness plan for pandemics, natural disasters and other supply chain disruptions.
“To stop more operators going the way of Scott’s and the 190 other transport operators that became insolvent in 2022, we need to stand together and push Federal Parliament to urgently pass reform to set fair, safe and sustainable standards in transport,” Kaine says.