High fuel prices, fewer moves drive some movers out of business

LOS ANGELES — May is a pivotal month for moving and storage companies. It's when families plan summertime moves to new neighborhoods or cities, hoping to minimize disrupting their children's lives.

May looks pretty grim.

"We'll usually get 250 calls through our office in May from people trying to schedule a move," said Frank Rolapp, president and co-owner of Beverly Hills Moving & Transfer Co. "At the rate we are going, we'll be lucky to get 100 calls.

"We've just come out of one of the worst winters I can remember, and now this. A lot of people in this industry will be going out of business this year."

Moving companies are idling at the intersection of two big problems for the economy: high fuel prices and the real estate slump. In California, gasoline is selling for an average of more than $4 a gallon, and diesel is averaging nearly $5 a gallon — $1.75 more than a year ago — while home sales are down.

"There are not as many people moving," said John Husing, an economist who specializes in the Inland Empire of the state. "That's what is happening to these companies. People are staying put."

The effect on Beverly Hills Moving & Transfer, which has 360 drivers and other workers, will be deep, Rolapp predicted, with maybe 100 to 150 moving jobs this summer rather than the usual 250 or so.

The storage side of the business is hitting fewer bumps in the road. With about 360,000 square feet of space in various locations, the company is benefiting from contracts with professional sports teams, celebrities, businesses in the entertainment industry and individual estates, Rolapp said.

Still, revenue will drop to about $15 million in 2008 from about $25 million before the slump, he said.

At Andy's Transfer & Storage in Glendale, which has 10 employees, revenue will probably be down this year from the $3.7 million the company made in 2007, Chairwoman Jill Longo said.

"Before, there was a lot of business expansion going on. Now, about 20 to 30 percent of it is companies moving to get into something less expensive, moving out of downtown [Los Angeles] and into the [San Fernando] Valley," she said. "There are a lot of downsizing moves right now. We go in, disassemble office cubicles and put them into storage."

Longo said she had been looking "at everything" to find cost savings — "our phone contracts, office-supply purchases, how much we are paying in fuel and where our guys go to fuel up."

In an industry riddled with unscrupulous operators, both companies are aided by their long track records and by several service awards from the giant moving companies with which they are affiliated, helping them hold onto business. And it could be worse, Longo said.

"The companies that do nothing but household moves are really struggling," she said. "We know of one company in Northern California that is selling one truck a month to make payroll. They are selling off their assets."

California moving companies are regulated by the state Public Utilities Commission. One of the problems moving companies face is that, unlike other industries and businesses, they are unable to impose fuel surcharges to mitigate the sting of record fuel prices, said Steve Weitekamp, president of the California Moving and Storage Association.

Compounding that, he said, is the fear among many companies of overpricing services at a time of sharp competition for declining business.

"There's been a dramatic decline in business, and some companies are putting off their paychecks. It's a difficult time," Weitekamp said.

The bite of fuel prices has become almost impossible to bear.

"It costs over $1,350 to fill up those 300-gallon tanks, and they are filling those tanks every 800 miles," Rolapp said.

The real-estate market slump sent the international holding company that both Longo and Rolapp work with into bankruptcy. Longo's company operates with North American Van Lines. Rolapp's works through Allied Van Lines. Both are brands of once-publicly traded Sirva, which filed for bankruptcy protection in 2007 and recently emerged as a private company owned by its principal creditors.

Chicago-based Sirva not only took on the task of moving people, it also took over the mortgages of the homes the families were leaving and even fronted customers money to buy their next homes in new cities. It found itself stuck with a growing inventory of homes that were rapidly losing value and rang up net losses of about $750 million over the last three years, according to the company's filings with the Securities and Exchange Commission.

Longo and Rolapp are hoping to weather the bad times and hold out for a turnaround in the housing market and in the economy.

"It's tough, but we believe it's all a cycle," like the one that the company weathered during a recession in the early 1990s, Longo said. "We're just hoping to pull through this one, too."