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Tuesday, May 21, 2024
Logistics

Virginia building fabricator, trucking firm folds amid economic uncertainty

DFI Systems Inc. President Marcus Gravely says soaring lumber prices, the costly decision to move the company headquarters during the COVID-19 pandemic and the inability to find new investors was the perfect storm that forced it to shut down in late March.

About 90 employees, including six drivers, are owed two weeks’ pay after losing their jobs on March 24, when the Emporia-based company ceased operations.

DFI Systems specialized in designing, fabricating and installing wall panels, floor joists and roof trusses for commercial and residential projects prior to its closing.

Gravely told FreightWaves that payroll checks were being released Wednesday. However, as of publication on Thursday, some former employees and drivers said they had not yet received their paychecks.

In order to pay former workers, Gravely said he made a deal with the bank to allow him to sell some of the company’s equipment without liens.

So far, Gravely said he’s sold three company-owned vehicles that were driven by DFI Systems’ officers. He’s also sold a few tractors, trailers and some forklifts to cover approximately $200,000 of back payroll owed to DSI Systems’ employees and drivers. 

Gravely said the plan is to pay the lowest-paid employees first, then work up the ladder to pay the top executives of DFI Systems. 

What happened?

Gravely said the death knell occurred when two potential investors “got cold feet” at the last minute because of ongoing recession fears.

“March 10 was the day I was supposed to get a cash infusion and around noon that day, I heard from the last investment company’s attorney,” Gravely said. “They were pulling out of the deal and did not want to invest in a construction company at this time. The deal fell apart on the day payroll was due.”

Former employees and drivers said they knew DSI was experiencing some financial problems but said they were surprised when the company ceased operations without any warning from management. 

“Everybody knew we were seeking investors,” Gravely told FreightWaves. “Employees saw me walking people around on site. I didn’t have a sit-down with the whole company to explain it, but I did talk to all the managers. I may not have sat down with all of the drivers, but they all knew I was looking for investment.”

Over the past year, Gravely said he had been searching for an equity investor to pour more money into DFI Systems to keep it afloat.

“Basically, the price spikes through COVID hammered us and we needed more cash and at the same time, the bank was tightening down on us,” he said.

Prior to the pandemic, a piece of oriented strand board (OSB) sold for around $15 per sheet. At that time, DFI Systems had a lot of fixed-price contracts based on that $15 price for OSB, Gravely said.

“When you price something at $15 a sheet and it goes up to $80 a sheet during the COVID spikes, there’s just no way to recover that,” he said.

DFI faces lawsuit

Prior to DFI Systems’ decision to close, a wholesale lumber distributor, Lumbermen Associates Inc. of Bristol, Pennsylvania, filed a breach-of-contract lawsuit on March 9 against the company.

In the civil suit, Lumbermen claims DFI Systems owes it nearly $1.5 million for lumber it “shipped and delivered lumber and lumber materials to DFI’s manufacturing facilities.”

“For over a decade, there were no issues between the parties,” the suit states. “However, in early 2022, DFI stopped paying for lumber that it ordered and received.”

Gravely didn’t respond to FreightWaves’ requests seeking comment about the lawsuit.

Costly decision to move HQ

The decision to move its operations from Hampton, Virginia, 90 miles away to Emporia, proved costly for DFI Systems, Gravely said.

In 2020, GEM Building Corp., the sister company of DFI Systems, purchased the 43-acre industrial property in Emporia, which was once owned by Perdue Farms, for $1 million.

“When I put budgets together in March of 2020, and by the time we finished construction in August of 2021, everything had doubled in price,” Gravely said. “Buying the new building had a lot to do with the company needing more cash to continue.”

DFI Systems plans to file for bankruptcy protection in the near future, although the company’s president isn’t sure if it will be for Chapter 7 or 11.

“If I can get a buyer that comes in and we can restructure, we’re going to do that,” Gravely said. “We’re trying to get all of our ducks in a row before we file for bankruptcy because once you file it gets really expensive.”

After working at DFI Systems for more than 20 years, Gravely said he is unsure of his next steps.

“I’m cleaning out my office right now,” Gravely said. “My entire adult life was all built around this company and it’s going to the dumpster right now. It’s just awful.”

Do you have a news tip or story to share? Send me an email or message me @cage_writer on Twitter. Your name will not be used without your permission.

Click for more articles by Clarissa Hawes.

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The post Virginia building fabricator, trucking firm folds amid economic uncertainty appeared first on FreightWaves.

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