The transportation of auto parts, finished vehicles, and other freight connected to the integrated cross-border assembly of automobiles makes up a significant part of total freight volume in the Canadian trucking and transportation industry. In recent weeks, both Stellantis (Brampton) and General Motors (Ingersoll) have made announcements about shifting production from Ontario factories to the United States. Ford’s Oakville assembly plant is currently shuttered as it retools for a planned reopening in 2026.
The effect these shifts will have on the transportation industry seems clear: less business to go around, and a still saturated competitive market fighting over reduced freight volumes. Bankruptcies and receiverships will likely follow, unfortunately.
For companies that have not reached a critical stage, it is good time to assess whether they have legal risks to attend to while they have time (and cash flow) to spare. If recent experience is anything to go by, four areas in particular should be considered:
Shareholder Disputes: Many of the businesses most at risk of financial trouble ahead are small, independent transportation companies. Such companies were often founded without much formality and grew rapidly when times were better (i.e. during the Covid-era boom in shipping). It is often the case that corporations that grow quickly do not revisit the corporate records that were created upon incorporation, including articles, by-laws, and shareholder agreements. If not, now is the time. Shareholder disputes are often much more straightforward and resolvable where the rules that govern are clearly defined.
Real Estate: Land and favourable long-term leases are often transportation companies’ most valuable assets. Leases and title documents should be reviewed carefully to ensure there are no surprises if such real estate assets are to be relied on for financing.
Employment: Companies that need to downsize or layoff workers must be careful to ensure that they are complying with applicable employment statutes (often the Canada Labour Code in the case of interprovincial transport). Employment contracts should be reviewed and updated to ensure compliance. Termination pay and severance can become a significant drain on a company’s finances if not handled carefully.
Receivership: Although in many cases a death sentence, with planning and forthright communication with lenders, companies can use a receivership to give themselves breathing room to restructure, negotiate down liabilities, and find a path to continued operations or a (relatively) painless exit. Gaining familiarity with the process well before it becomes a possibility is a prudent exercise.
No doubt, there will be a rough road ahead for many transportation companies. Assessing legal risks and taking proactive steps to address those risks is a valuable exercise for the industry.
Alastair McNish