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CNF grounds Emery for good
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December 5, 2001: 6:05 p.m. ET
Freight company will use other cargo carriers, take $200M 4Q charge.
By Staff Writer Chris Isidore
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NEW YORK (CNN/Money) - CNF Inc. is giving up attempts to get its Emery Worldwide cargo airlines back in the air and will take a $200 million charge for permanently shutting the operation.
The company has not been able to fly its own cargo jets since August, when the Federal Aviation Administration threatened to revoke its operating certificate if it did not voluntarily ground the planes. The FAA cited a continued series of maintenance problems that its officials said appeared to have played a role in a series of crashes, including one fatal crash.
The company has operated Emery since August using aircraft operated under contract by other cargo carriers. It will essentially continue to do the same, merging Emery into a new unit called Menlo Worldwide, which will include Menlo Logistics, a company that handles customers' logistics management, and Vector SCM, which is a joint venture with General Motors Corp. (GM: Research, Estimates) that manages GM's worldwide distribution system.
The company said that Emery CEO Chutta Ratnathicam will return to his former position as Chief Financial Officer of holding company CNF, while Menlo Logistics CEO John Williford will be CEO of the new combined Menlo Worldwide.
At the time of the August grounding, the company said it would work with the FAA to try to get its own planes back in the air. But the latest move is not unexpected. Even before the maintenance problems grounded Emery there was a belief among analysts that the air cargo market had at least one carrier too many operating its own planes, especially with a weaker U.S. economy cutting into demand for air cargo shipments.
"By altering the basic business model of Emery in North America, we are taking a major step in CNF's strategy of reducing assets in a way that will benefit both customers and investors," said a statement from CNF CEO Gregory Quesnel.
Emery also suffered a setback when it lost a contract to carry a large amount of priority mail from the U.S. Postal Service to FedEx Corp., a move it fought unsuccessfully in court.
Most of the charge that the company will take in the fourth quarter is for disposal of aircraft, leases and other costs. About 130 workers at Emery Worldwide will lose their jobs as a result of the move, with 90 workers being laid off by the end of the week, followed by another 40 workers over the next six to nine months, a spokesman told Reuters. The company's air operations still had about 200 employees after about 800 people lost their jobs following the grounding in August.
In addition to Menlo Worldwide, CNF's operations include Con-Way Transportation Services Inc., a series of nonunion regional trucking companies providing near national coverage. 
Reuters contributed to this report
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