Financial Challenges Still Abound
The union concessions and terminal sales do not move YRC out of financial turmoil amid the deep freight recession and the enormous debt the company occurred in making a number of acquisitions over recent years. (See YRC Worldwide Continues to Struggle, but Keeps Finding Ways to Cut Costs and Raise Cash.)
Recently, YRC reported a $309 million loss in the second quarter. It is still trying to rework covenants and other terms of its loans with a group of bankers. It also reported a stunning 35% drop in second quarter freight tonnage – a much steeper slide than most analysts expected, and more than most other LTL carriers.
Jim Hoffa, Teamsters general president, said in a press release that, “Now, YRCW, banks and other stakeholders have to step up and do their part to ensure the company’s long-term survival. Do the banks want the fate of 35,000 YRCW workers, hundreds of thousands of retirees and hundreds of thousands of other workers to be their responsibility if they do not significantly rework YRCW’s loan facilities?”
To add fuel to the fire at YRC, the Wall Street Journal reported last week that YRC competitors are using the carrier’s financial crisis to pry business away.
According to the Journal, in recent weeks LTL rival Estes Express Lines, for example, has told its sales force in a series of “talking points memos” to send potential shippers the message that "companies in trouble never give customers a heads-up that they are near the end," potentially leaving clients' freight stranded around the country.
It also reports that FedEx has in recent months sent some YRC customers a pamphlet citing YRC's "significant work-force reductions" and suggesting these customers move their freight to FedEx "if you're concerned about potential service disruptions to your supply chain."
At the same time, LTL carrier Saia apparently has sent some YRC customers a letter offering prices "equal to a 12% discount off the current pricing the [customer] currently has in place with any carrier" in the YRC group, though the company says it is also offering discounts to non-YRC shippers.
Estimates are that YRC, at least until recently, had an approximately 20% market share of the $51 billion (pre-recession) LTL market in the US.
"We believe our volumes are being impacted by tactics from our competitors that are clearly targeted at buying market share at any price, and attempting to make our financial position seem worse than it is," Zollars told analysts on the Q2 earnings call.
So far, YRC has been able to keep one step ahead of potential bankruptcy, and now says it is confident it can weather the storm.
Many warn that if YRC was to fold, it could quickly lead to a real capacity crunch in the US LTL market.
What’s your latest view on YRC and its business and financial prospects? Will the latest union concessions make a difference? Do you expect to see other LTL carriers gain share? What can YRC do to maintain its position? Let us know your thoughts at the Feedback button below.
SCDigest is Twittering!
Follow us now at https://twitter.com/scdigest