YRC remains upbeat about 2nd quarter

It takes a long time to turn a battleship, but the trucking industry behemoth known as YRC Worldwide appears to have reversed course financially after a significant restructuring of its network footprint.

The Overland Park, Kan.-based freight transportation conglomerate will be in the black after a half-year of losses when it announces second quarter earnings on July 25, Chairman and Chief Executive Bill Zollars confirmed in an interview.

YRC is the $9.6 billion holding company for Yellow Transportation and Roadway, two large, less-than-truckload carriers with national coverage (organized under the YRC National group) that specialize in long-distance moves. YRC Regional comprises USF Holland, USF Reddaway and New Penn. It also owns Reimer Express, a Canadian trucking firm and USF Glen Moore, a non-union truckload carrier. YRC Logistics is the company's third-party logistics arm.

The company is the product of a series of acquisitions since 2003 as the former Yellow Corp. bought rival Roadway and expanded into the second- and next-day delivery markets.

Zollars expressed worry that high oil prices, which have created a huge challenge for the diesel-dependent trucking industry, could end up stalling the entire economy.

The trucking industry has tremendous capacity at the moment, but the recent cutbacks and business failures mean there won抰 be enough trucks or drivers to meet short-term demand when the economy bounces back, which will put upward pressure on pricing, he said.

The real difference this time is oil price. A lot of companies aren't going to make it through this. So there will be less fundamental capacity than probably resulted in the last downturn?seven years ago, he said. The biggest driver of profitability will be the economy, but if you抮e not a global player in the long-term you抮e not going to be successful. The last point is an indirect reference to YRC Logistics setting up shop in China, where the company plans to soon acquire a large Shanghai-based trucking company to serve domestic and international shippers. YRC Logistics also has offices in Europe and South America.

YRC lost $640 million in 2007 after a horrible fourth quarter in which it wrote off the value of some acquisitions and struggled with soft freight demand as the U.S. economy contracted.

Early this year, YRC shuttered 27 terminals in the South and Southwest operated by USF Reddaway and USF Holland and eliminated 1,100 workers. Those moves, along with some other reduced overhead, helped the struggling Regional group reduce operating costs.

YRC officials, in line with earlier guidance to Wall Street, say each of their subsidiaries will make a profit this quarter, although any moves into positive territory for USF Reddaway and USF Holland are likely to be small considering how much ground they had to make up to break even.

Zollars said the new labor deal for its unionized LTL carriers will help improve service and profitability because it gives the company much needed operational flexibility.

He continued to stand behind maintaining Yellow and Roadway as separate companies rather than folding them together, but did say the companies will integrate some terminals and other non-customer facing functions.

Zollars is scheduled to meet with reporters in Washington on Thursday to provide an update on YRC. 

Source: American Shipper