Friday, December 20, 2013

Yellow in the Red

YRC asks Teamsters for continued concessions in struggle to regain profitability.

As a general rule, throwing yourself on the mercy of the International Brotherhood of Teamsters is not a winning strategy. It’s been working for YRC Worldwide, though, and the nation’s second largest trucking operator really doesn’t have a choice.

With $1.36 billion in debt, and a troubled restructuring that got the red ink flowing again after a brief return to profitability, YRC faces creditors who are demanding an extension of Teamster concessions through 2019 before agreeing to refinancing of the carrier’s obligations, and allowing it to avoid bankruptcy. YRC Teamsters agreed to a 15 percent cut in wages in 2009 and 2010, as well as a long-term reduction in pension contributions, concessions that were extended in 2010 through 2015.

The LTL carrier, which has lost more than $3 billion since 2006, has not yet released its proposals, so it’s not known exactly what concessions or changes are on the table. Citing “enormous sacrifices” already by YRC workers, the Teamsters union isn’t recommending a “yes” or “no” vote, Teamsters National Freight Division Director Tyson Johnson said, but “voted to allow the company’s proposal to go before members so that they can cast a secret-ballot vote,” reported the Journal of Commerce.

YRC Worldwide has reduced losses substantially since CEO James Welch arrived in 2011, but is still far from being in the black. The company lost $44.4 million in the third quarter.

Most of YRC’s troubles are at YRC Freight, but the company’s rapidly rising interest expense on debt also threatens its survival. YRC Worldwide paid $43.1 million in interest last quarter. YRC’s three regional LTL operating companies — Holland, New Penn and Reddaway — returned to profit in 2010 and doubled their combined net income last year to $70 million.

For those of us on the shippers side, it wouldn't be in any of our interests for YRC to go Chapter 11. That would eliminate one significant option and tend to make the surviving carriers even less willing to price aggressively than they have been recently.

Kirk Shearer
TOTALogistix, Inc.
1-800-989-0054 x103

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