Wednesday, November 29, 2006

On the Road as Far as China

Anyone who has been on a road trip lately is likely to have seen a big Yellow or Roadway truck hauling merchandise.

YRC Worldwide owns those trucking lines, and several other businesses. William D. Zollars, 59, the chairman and chief executive, spoke recently about the company’s rapid growth, the spotlight on gasoline prices and the perk of being home every night. Following are excerpts:

Q. You announced last month that third-quarter sales reached a quarterly record of $2.57 billion. Wall Street had expected sales of $2.64 billion. Why is Wall Street disappointed when you are setting records?

A. The revenue fell short of projections because the economy slowed significantly in the quarter. We were the last company to report earnings in our sector, and every other company had already reported revenue that fell short of projections.

Q. Higher gasoline prices have been a thorn in the side of consumers for much of this year. Have they been painful for your company, too?

A. Not directly because we have a fuel surcharge that we put in place in 1996. It is adjusted on a weekly basis and has protected us from the rising gas prices.

Q. Have your customers complained about the rise in the surcharge?

A. The fuel surcharge used to be viewed as being temporary, and the fact that it wasn’t very much, customers really didn’t pay a lot of attention to it. But it’s been as high as 20 percent now for quite a while and as a result of that has become an integral part of the pricing discussion. In the old days, that topic probably wouldn’t have come up. Today, it’s front and center with every one of our customers.

Q. The company’s share price has fallen more than 20 percent since January. What is going on?

A. People have been very goosey about the economy, with predictions of a recession about every month. Since we are a cyclical company, we really get whacked when downturns are seen as imminent. Of course, that hasn’t happened, but we believe it keeps our stock price from performing where we think it should be.

And even though we have the fuel surcharge, people think there is a correlation between high gas prices and our costs.

Q. You acquired the USF Companies last year and now are on pace to finish 2006 with $10 billion in sales for the first time. Are you now shopping for more properties?

A. We bought Roadway in 2003, so we have had two major acquisitions in the past three years. We have tripled the size of the company since 2003. I think that we are probably finished buying asset-based companies in the U.S. and have shifted our focus to building out the global network. We have a couple of joint ventures in China, which is a primary area of emphasis for us.

Q. Why is China important?

A. We are basically following our customers around the world. And almost all of our customers now have a presence in China.

We have two joint ventures with a Chinese company, Jin Jiang. One is in the freight-forwarding part of the business; the other is in the logistics side of the business. Both of those are going well. And we probably will be making acquisitions there now as part of that strategy as well.

Q. When will you announce the China deals?

A. I would say definitely within the next year.

Q. The lifestyle and demands of trucking must make it tough to recruit and retain drivers.

A. We are a little bit advantaged in that regard because many of our companies, including Yellow and Roadway, are Teamster companies, meaning we offer wages and benefits that are higher relative to other competitors. And we also offer a better quality of life for our drivers. Because of the way our networks are engineered, they are usually home every night in their own beds. We only have about a 2 percent turnover rate.

Q. You are also on the boards of other companies, including Cigna and ProLogis. Has the spy scandal at Hewlett-Packard caused you to rethink your role on them?

A. I think there are good reasons to serve on other boards. One is to pick up a perspective that you don’t have in your own company. One of the boards I am on is health care related, and that is a big deal for any company. And the other one is a logistics company in the distribution-center business, and a lot of that stuff is very translatable to our businesses.

At the end of the day, I have a hard time relating to all of these scandals du jour because they are so foreign to my experiences.

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