The parent of regional parcel delivery carrier Lone Star Overnight (LSO) has fired Richard M. Metzler, its president and CEO, and does not plan to fill either position, FreightWaves has learned.
Meztler, whose last day was Thursday, ran Austin, Texas-based LSO since March 2018. He has spent decades in the transportation and logistics field at companies across the modal spectrum. It is unclear what Metzler’s next move will be.
The move comes as LSO, which operates in 10 states including every ZIP code in Texas, braces for the heart of the peak holiday delivery season. LSO is already struggling to efficiently process an avalanche of holiday packages due to delays in installing a full retinue of new material-handling equipment, FreightWaves has learned.
Metzler’s departure was triggered by a disagreement over strategy with LSO’s owners, Austin-based private equity firm Ocelot Capital Management, FreightWaves has learned. It is unclear what strategy Ocelot will follow after Metzler’s departure. WeDo Logistics, an Ocelot-controlled holding company, acquired LSO in November 2020 for an undisclosed sum.
One option for Ocelot would be to sell LSO into a hot market for parcel-delivery players. Private equity firm American Securities LLC plans to build a national network from its merger of East Coast firm LaserShip, which American Securities bought in early 2021, and West Coast carrier OnTrac, which it acquired in October for $1.3 billion. LSO could provide a presence in the Southwest that a LaserShip-OnTrac combination currently lacks, and its recently launched expansion into Missouri, Kansas and Illinois could offer coverage in the Midwest that would link what is now a bicoastal delivery network.
Andrew Townsend, who founded Ocelot in 2018 as an extension of a multifamily business, was not immediately available to comment.
The seeds of LSO’s current situation were sown months ago when it received customers’ holiday forecasts that ended up vastly understating the volume of traffic actually tendered, FreightWaves has learned. Another issue for LSO is that it processes an unusually high percentage of packages injected from outside its network into its main facility in Dallas. If the carrier controlled more of its pickups, it would have more leverage in capping a customer’s loads. By contrast, it is harder to turn away trailers of packages that turn up on LSOs doorstep.
Meztler told Ocelot executives several months ago that despite the unprecedented volume surges which began in early November and has not abated, LSO’s profits might not meet expectations due to the higher costs and inefficiencies of processing packages without all of the promised material-handling equipment, FreightWaves has learned. Dissatisfied with the situation, Ocelot executives began discussing a parting of the ways with Metzler in late October, FreightWaves has learned.
In the near term, the responsibility of ensuring LSO customers get their goods delivered on time is likely to fall to Chief Operating Officer Sean O’Connor, who joined the company in October.
LSO is not alone in being chockablock with holiday traffic. As happened during the 2020 peak, the combination of historically high delivery demand and moves by UPS Inc. (NYSE: UPS) and FedEx Corp. (NYSE: FDX) to cap volumes from many large customers have left big shippers scrambling for delivery alternatives. As with last year, regional carriers were the first option for many. Demand has been so strong that all regional carriers stopped accepting any new holiday business months ago.
Ocelot’s strengths are in finance, sales and marketing, which are not surprising given the nature of its work. It has exposure to the parcel-delivery field through a $50 million financing round it led over the summer for Austin-based Fetch Delivery, which specializes in delivery services to multifamily communities.
On Wednesday, private equity firm Seacoast Capital said it invested $20 million of preferred stock and subordinated debt into LSO to refinance its debt, buy out an unidentified investor and provide working capital to the carrier. The Seacoast investment is unrelated to Metzler’s departure, FreightWaves has learned.