Monday, August 24, 2009

Threat level continues to rise on YRC

The drumbeat grows louder, the buzzards are circling, the sharks scent blood...

Rumors of the possible impending collapse of LTL giant YRC Worldwide continue to shake the trucking industry ahead of the Overland Park, Kansas-based company’s Feb. 17th deadline for rolling over or restructuring its massive bank debt. Despite anticipated labor cost savings of over $335 million for 2009, including an unprecedented 10% wage giveback by the Teamsters, doubts persist about YRC’s continued viability as it struggles to integrate its Yellow Freight and Roadway units.

The Kansas City Star reports the company is confident that the cost-cutting they have undertaken and the continued cooperation of their banking group will allow them to stave off bankruptcy, but nervous shippers are exploring alternatives. Industry veterans know that having your goods in the pipeline of a carrier who goes belly up is a nightmare scenario for a company. Freight can be frozen in the pipeline, with no employees remaining to locate, much less deliver it, and even ownership of the products making up the shipments tendered to the defunct carrier can be called into question. Should this worst case occur, it typically happens with little or no advance warning.

YRC is the largest LTL carrier in the country. Should it fail, removing its enormous capacity from the nation’s transport grid, there will be major ramifications for anyone who ships in the US. The resulting scramble for the business could make DHL’s exit from the domestic package market look like a picnic, and UPS and FedEx will likely gain significant new market share and negotiating clout.

What role the Obama administration or the Democratic congress might take when faced with the loss of tens of thousands of union jobs is an additional wild card. This ongoing situation is volatile, deadly serious, and bears close attention by transportation professionals and the companies who rely on them.


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