YRC's future the topic of much debate
LTL carrier provides update and market watchers place their bets
Dave Hannon -- Purchasing, 7/9/2009 12:42:59 PM
Less-than-truckload buyers, carriers and market watchers are all monitoring carrier YRC Worldwide's every move, as the nation's biggest LTL carrier tries to pull itself through the worst freight recession in recent memory.
YRC provided an update yesterday on its "self-help recovery plan" as it was called by CEO Bill Zollars, outlining the status of its talks with Teamsters, pension funds and its network re-engineering project. But while timely, YRC's update did not give freight buyers and market watchers any real insight to the carrier's future and, in some respects, raised only more questions.
In a note released this morning (entitled "How long can YRC survive?") analysts at Stifel, Nicolaus and Co. point out that a snowball effect has hit YRC's volumes in the second quarter after integration efforts hit service levels in the first quarter, and many shippers diverted some freight away from YRC as a result.
Stifel says, "The question we hear most is, ‘will YRC be around in 2010?' Shrinking to prosperity has never worked in the LTL business, yet YRC is attempting to be the first to pull it off. We do not know, when we wind down 2009, whether the company will still be operating as it is today, operating in a different/smaller form, or closed for good."
A Reuters report earlier this week (entitled "If YRC fails, what happens to the U.S. truck sector?") suggests that "if YRC fails it could provide competitors with just the reduction in industry capacity they need to jack up pricing for the first time since late 2006."
Reuters cites Morgan Keegan analyst Art Hatfield as saying, "One of two things has to happen [for rates to go up]: either we have to lose capacity or demand has to come back. The rate at which YRC's business is deteriorating makes it more likely that it will be them to go out of business rather than someone else."
But despite the apparent wave of challenges, YRC may have a trick or two up its sleeve, say Stifel analysts. "The company has shown it will try anything (wage concessions, pension deferrals, pension terminations, integration, sale-leasebacks, footprint reductions, TARP, etc.) to try and stay afloat, so it would not surprise us, if YRC lasts longer than some have predicted."
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