The head of YRC Worldwide Inc. (YRCW), the largest standalone U.S. trucking company by revenue, said on Friday that a change in shippers' behavior provided the first sign of a recovery in the domestic economy.Bill Zollars, Chairman and CEO of the Overland Park, Kan.-based company, said the average size of its less-than-truckload, or LTL, shipments was increasing.
"That's usually an early indicator that the economy is turning," said Zollars in an interview with Dow Jones Newswires after YRC had reported a return to profitability in the second quarter.
Zollars stressed that it was too early to tell whether the trend represented a sustained improvement in economic conditions, and rivals have remained cautious about their outlook.
"We've been gathering economic data from multiple sources and have concluded that there are no indicators that point to any meaningful recovery or improvement in economic activity over the remainder of the year," said Douglas Stotlar, CEO of Con-Way Inc. (CNW) on a conference call this week.
The so-called "freight economy" is viewed as a key barometer of the broader business and consumer environment, and trucking companies have been the hardest hit by the combination of weak demand and soaring fuel prices.
The recent dip in diesel prices has helped truckers, and pricing power has improved after overcapacity eased following a spate of bankruptcies among smaller operators.
"I can't believe I'm saying this, but $100 a barrel oil would be nice at this point," said Zollars on an analysts' call Friday. "The (fuel) price levels now are manageable."
YRC has restructured its network and shed 1,100 jobs in an effort to regain profitability, and Zollars said trends among shippers could help build momentum through the rest of the year, despite the continuing fall in volume during the second quarter.
Customers are looking to shorten supply chains by sourcing materials closer to their base, as well as reducing inventories with faster and smaller shipments.
"That's right in our wheel-base," said Zollars, though he noted an opposing trend among customers to consolidate cargo on single truckloads and eliminate LTL business. LTL operators group shipments on a single truck.
"It's pretty much a standoff (between the two trends)," he said, but forecast that shippers would intensify their focus on speed of shipment as the economy recovered.
United Parcel Service Inc. (UPS) and FedEx Corp. (FDX) have both been struggling with a drop in premium business as customers trade down from express delivery products.
YRC shares fell as much as 9% earlier Friday after the company reported a 35% drop in net profits after the market close Thursday. Reported net income of $ 36.3 million, or 62 cents a share, compared with $55.4 million, or 95 cents a share, a year earlier. Operating revenue dropped 3.5% to $2.4 billion.
The shares were recently trading down 7.1% at $18.85, with rivals' stocks boasting gains.
Zollars said he expected volumes to pick up in the fourth quarter after continuing falls in the period to June 30 at both its national and regional segments, which operate under brands including Yellow and Roadway.
Outside the domestic economy, Zollars said the acquisition of Shanghai Jiayu Logistics, one of China's largest truck operators, would close in August.
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