Friday, February 01, 2008

Analyst: DHL, FedEx deal 'makes sense'

An international financial firm has prepared an analysis for investors regarding the possibility of a deal involving FedEx and the U.S. side of DHL’s freight business.

The Jan. 24 investment research note by UBS was in response to a story in the Financial Times Deutschland, a German business newspaper, that Deutsche Post World Net (DPWN) is talking with FedEx about selling assets of DHL’s business in America to rival FedEx. The German-based DPWN is the parent company of DHL.

According to the UBS analysis, a deal between DHL and FedEx revolving around DHL’s domestic U.S. parcel business “conceptually makes sense.”

Interestingly, UBS references its own annual airfreight survey to support its claim “most customers have effectively given up on DHL USA.”

In 2007, 42 percent of customers thought it “unlikely” DHL will become a strong competitive threat in the U.S. airfreight industry, according to the UBS survey. The 2007 survey also said 14 percent of customers thought there is “no chance” DHL will become a strong competitive threat. As a result, a sum total of 56 percent of customers held an unfavorable expectation last year of DHL’s prospects to compete with UPS and FedEx in the U.S. market.

In contrast, in 2004 the unfavorable total was 31 percent of surveyed customers (26 percent saying “unlikely” and 5 percent saying “no chance”).

What’s more, in 2004 a sum total of 70 percent of surveyed customers held favorable expectations for DHL’s potential to compete in the United States with UPS and FedEx — 20 percent saying “definitely” and 50 percent saying “likely.”

The research note said, “Any deal would also likely allow FedEx to handle the U.S. distribution for DHL’s premier international parcel business.”

Rick Paterson, UBS’s FedEx analyst, elaborated on the comment when he spoke with the Dow Jones news service.

Memphis-based FedEx does not especially need DHL’s delivery assets in the United States, Paterson said. But FedEx would benefit if DHL agreed to FedEx becoming the U.S. distributor of DHL’s substantial package shipping originating in Europe or Asia, Paterson told Dow Jones.

In any event, the UBS research note — for which Paterson was one of three analysts who prepared it — said an agreement reached between DHL and FedEx “doesn’t signal a done deal.” That’s because antitrust law could be “a major stumbling block,” the note said.

A Tuesday report in the Wall Street Journal said DPWN is considering “a variety of options” to address the money-losing U.S. division of DHL.

DPWN Chief Financial Officer John Allan in an interview told the Wall Street Journal whichever option is settled on, he expects clarity in “a matter of months” in his words.

In an interview with the Wilmington News Journal last week, DHL Americas Director of Corporate Communications Jonathan Baker said the company in general would not respond to future media reports “speculating” on the future of DHL in the United States.

With headquarters in Zurich and Basel, Switzerland, UBS operates in more than 50 countries and from major international centers. UBS employs more than 80,000 people.

Is the Worst Over for YRC Worldwide?

In a previous report on YRC Worldwide (YRCW) on January 9, we reiterated our underweight recommendation on the stock as a result of an expectation that the economy in the first half of 2008 would slow materially. While we still believe the economy will endure a near-term sluggish rate of growth, the latest actions from the Federal Reserve and the government should help to stave off a recession and a reignite growth later this year.


The company reports earnings on January 28, and we expect a drastic year-over-year decline in earnings, but there is a probability of the report being received somewhat favorably by the market. CEO William Zollars has been very negative about the outlook for the economy since late 2007, essentially preparing investors for the worst case scenario. As noted above, our modeling for lower per share earnings reflects (in our previous report we lowered our earnings estimates to $0.51 and $2.22 for the fourth quarter and full year, respectively) fuel expenses increasing approximately 30% during the fourth quarter. Industry tonnage failed to improve in the fourth quarter, a key input to our analysis. However, we anticipate industry tonnage to regain momentum in the second quarter, with the second half of the year being stronger.

The fuel cost structure in the quarter is obviously a key area of focus for us, but we are placing a greater weight to how management controlled variable expenses as fuel is largely out of their control. All transportation companies are dealing with higher fuel prices right now, and the best management teams are those who are able to mitigate the effect with strong cost management elsewhere in the business.

In summary, we expect the trucking industry to continue to be weak for the first half of the year in all important operating metrics due to existing macro circumstances. But, as the Fed’s interest rate cuts begin to flow through the economy, in addition to the government’s economic stimulus package, we believe stronger earnings in the back half of the year are supportive of higher valuation for the industry. Market expectations are so low right now that any modicum of good news should send the stocks in the sector higher. We are increasing our recommendation on YRCW shares to overweight at this time, but would like to add the caveat that continued cautious statements from Mr. Zollars could pressure the stock. The Company is one of the largest truckload carriers in the country, and when the market begins to turn, YRCW should be ahead of the majority of the industry. A year from now, we expect YRCW shares to be trading around $27.00.

Written by David Silver, a Research Analyst for Wall Street Strategies (www.wstreet.com) covering companies in the Transports, Autos, and Beverage sectors.

Wednesday, January 30, 2008

Zollars: U.S. recession odds probably above 50-50

The U.S. economy is more than likely headed for a recession due to to high fuel costs, interest rates and the housing crisis, the top executive of North America's largest trucking company said on Wednesday.

"The odds are now probably better than 50-50 that we will see a textbook definition recession of two consecutive quarters of negative economic growth," YRC Worldwide Inc Chief Executive Bill Zollars told Reuters in a telephone interview.

Zollars added that the company's freight volumes appear to have hit bottom, "but the question is how long we're going to stay there." Full Story...

Pension charge swings UPS to loss

United Parcel Service Inc. reported a loss in the fourth quarter after taking a $6.1 billion pension charge.

The Atlanta-based package shipper reported a loss of $2.58 billion, or $2.46 a share, on $13.4 billion in revenue. That compares with net income of $1.13 billion, or $1.04 a share, on $12.6 billion in revenue in the fourth quarter of 2006.

During the quarter, UPS announced the ratification of a new five-year agreement with the International Brotherhood of Teamsters. As a result, UPS paid $6.1 billion to move 45,000 of its employees from one pension plan to another.

For full-year 2007, UPS had net income of $447 million, or 42 cents a share, on $49.7 billion in revenue, compared with net income of $4.2 billion, or $3.86 a share, on $47.5 billion in revenue in 2006.

ABF Agrees to Be Bound by 2008-2013 National Freight Standards Agreement

Company Will Sign Proposed Pact, Protecting Drivers and Dockworkers

ABF Freight System, Inc. has agreed to the Teamster Union’s demand that the company should agree to be bound by the proposed 2008-2013 Teamsters National Freight Industry Standards, which will protect union members’ futures.

By agreeing to be bound by the proposed standards, ABF employees’ health, welfare and pension benefits will be protected. Also, ABF employees’ wages and working conditions will improve, as well as their job security.

“We are pleased that ABF has agreed to be bound by the 2008-2013 Teamsters National Freight Industry Standards because it will protect our members’ futures,” said Tyson Johnson, Director of the Teamsters National Freight Division and lead negotiator of the proposed agreement. “Improving and protecting our members’ wages, benefits and working conditions are our top priority. I urge all Teamster freight members to approve the tentative agreement.”

The tentative agreement, also known as the National Master Freight Agreement, provides record benefit contributions from employers that will help protect health, welfare and pension benefits.

Members are voting on the agreement now, and ballots are due February 8.

Workers in Arizona and California Seek Union Membership at UPS Freight

An Overwhelming Majority of Workers Seek To Join Locals 104 And 431

An overwhelming majority of about 300 workers at the UPS Freight (formerly Overnite Transportation) terminals in Phoenix, Tucson and Flagstaff, in Arizona, and two terminals in Fresno, California have signed authorization cards to become Teamsters, bringing the total number of drivers and dockworkers seeking to join the union to about 3,500 since January 16, Teamsters General President Jim Hoffa announced.

The Arizona workers are seeking to join Local 104 in Phoenix, while the Fresno workers are seeking to join Local 431.

“Our organizer, Kathy Tiihonen, and our business agent, Joe Rhein, did a great job on this campaign, and I want to congratulate the UPS Freight workers here in Arizona,” said Andy Marshall, Secretary-Treasurer of Local 104. “We look forward to providing the UPS Freight workers with excellent representation.”

“The group of UPS Freight workers in Fresno is one of the most excited groups that I’ve had the opportunity to organize,” said Darrell Pratt, President of Local 431 in Fresno. “I am looking forward to negotiating a contract that will address these workers’ concerns.”

“These latest victories show that no matter the size or location of the UPS Freight terminals, workers are joining together to improve their lives by signing cards to join the Teamsters. They know that as Teamsters, they will have a strong voice and the backing of the strongest transportation union in North America,” said Ken Hall, Director of the Teamsters Package Division.

In addition to the Arizona and Fresno workers, a majority of UPS Freight workers in Atlanta, Newburgh, Farmingdale, Louisville, Lexington, Milwaukee, Minneapolis, Southern California, Oakland, Seattle, New England, Memphis and Detroit have submitted cards to become Teamsters.

Tuesday, January 29, 2008

Carriers knuckle down for ‘08

A sluggish freight environment coupled with higher operating costs is forcing many carriers to tighten their belts and look to smaller, more profitable niches.

“In a difficult economy where opportunities to improve margin are limited, operational execution becomes critically important,” said Douglas Stotlar, president & CEO of Con-way Inc., in his company’s year-end earnings report “We took specific actions in 2007 to respond to the market and reposition our businesses. This will continue into 2008, as will our focus on providing customers with reliable, premium-value LTL and truckload transportation services.”

While Con-way’s revenue increased 20.2% to $1.2 billion in the fourth quarter last year compared to the same period in 2006, net income dropped by well over 50% to $34.5 million. For 2007, revenues increased 3.9% to $4.39 billion compared to 2006, while net income again fell significantly to $146.8 million for the year from $265.2 million in 2006.

Trucking freight rates are also increasingly under pressure as shippers step up their efforts to lower transportation costs. “Trucking capacity in our industry continued to outstrip freight demand during the fourth quarter [in 2007] and overall truck tonnage declined,” noted David Parker, chairman, president & CEO at Covenant Transportation, in his firm’s year-end release. Full Story....

Metro Atlanta UPS Freight workers to become Teamsters

Following the recent lead of their brethren in Memphis, Tenn., UPS Freight workers in three metro Atlanta terminals are planning to join the Teamsters.

A majority of about 360 workers at the UPS Freight terminals in Atlanta, Lawrenceville and Marietta signed authorization cards to become Teamsters, Teamsters General President Jim Hoffa said Tuesday. Their move brings the total number of drivers and dockworkers planning to join the union to about 3,200 since Jan. 16.

The Georgia workers want to join Local 728 in Atlanta.

UPS Freight, formerly Overnite Transportation, is a unit of Atlanta-based United Parcel Service Inc.

Canadian research shows truck exhaust ups risk of heart attack

New research shows that exposure to air pollution such as particulate matter in diesel truck exhaust elevates your risk of heart attack and stroke.

Every year, there are approximately 6,000 additional deaths in Canada because of short-term exposure to air pollution, and research suggests that 69 per cent of these deaths are from heart disease and stroke, the Heart and Stroke Foundation reported Monday in its 2008 report card on the health of Canadians.

Yet a poll of Canadians by Heart and Stroke showed that when asked to name diseases affected by air pollution, 82 per cent named respiratory diseases, 34 per cent said cancer, and only 13 per cent mentioned heart disease.

"In southern Ontario we have a wide variety (of sources of pollution). In your community, truck traffic is a factor," said Dr. Murray Finkelstein, a professor of occupational health and environmental science at McMaster University in Hamilton.

Full Story.....

YRC Worldwide plans to announce restructuring

YRC Worldwide will restructure its regional trucking operations in the face of its worst financial quarter in 15 years, but analysts were told Monday the announcement is a couple of weeks away.

Cost-saving plans that YRC did reveal did not boost investor confidence. The stock of the Overland Park company plunged following the release of its quarterly results.

YRC’s stock fell to $16.08 in Nasdaq trading Monday, down 14.7 percent from Friday’s close and reversing a steady climb in the stock price since Jan. 4. The stock decline came after the company reported a fourth-quarter net loss of $735.77 million, or $12.99 a share. That compared with earnings of $46.46 million, or 80 cents a share, during the same period in 2006.

Two analysts at Bear Stearns & Co. and Merrill Lynch & Co. last week predicted YRC would announce the closing of some of its regional operations at USF Reddaway and USF Holland in its presentation Monday.

Bill Zollars, YRC’s chairman and chief executive, said: “The restructuring plan is pretty much on schedule, but it’s not quite ready to roll out.”

YRC performed below analyst expectations for the quarter, earning 1 cent a share before taking charges totaling $13 a share. Analysts on average expected YRC to earn 53 cents a share before charges, according to a Bloomberg News survey.

The biggest charge was $782 million, taken mainly due to the YRC regional carriers declining in value and the sharp drop in stock price through 2007. Revenues for the fourth quarter fell to $2.35 billion, a 2.4 percent drop from the 2006 fourth quarter. The weight of freight moved by YRC’s national carriers, Yellow Transportation and Roadway, fell by 8 percent compared with the 2006 fourth quarter.

Zollars said the economic downturn has continued into the normally slow first quarter, but he was hopeful that the company’s fortunes would improve as the year proceeded.

“It feels like we’re at the bottom” of the economic cycle, he said. “I’m not sure how long the bottom’s going to last, but at least it doesn’t look like much further deterioration.”

Zollars discussed some integrational changes that will be occurring at YRC this year, including combining the corporate sales force that up to now has been separate for the company’s various brands.

The company last year formed its Enterprise Solutions Group to provide a single contact for its biggest customers. Now all customers will have that same type of service.

YRC also will combine the technological operating platforms of Yellow and Roadway to create more seamless service and better manage all of the company’s freight, he said.

YRC said another positive development recently is the tentative five-year contract with the Teamsters union, which represents about 50,000 YRC employees. The proposed agreement is being voted on by the work force, and it will provide greater operational flexibility for the company, said Mike Smid, president of YRC North American Transportation.

In addition to providing increases in wages and benefits, YRC was able to get the Teamsters to agree to allow the company to use utility employees as well as temporary overnight dockworkers for four-hour stretches during busy times. The agreement also allows YRC to take more of its freight off rails and use other trucking alternatives, such as other truckload carriers.

“It’s no fun on the downturn, but it’s a lot of fun on the way back up,” Zollars said. “We didn’t like 2007 at all, but we expect to get back on track sooner rather than later.”

Jason Seidl, analyst for Credit Suisse Holdings in New York, agreed that the new Teamsters contract would help the company, but many challenges remain. USF Corp., the regional trucking firm YRC bought in 2005, was having problems even before the acquisition. Those difficulties were masked at the time by a strong economy, Seidl said.

Zollars “would seem to be the most optimistic of all the truckers right now,” he said.

For the year, YRC lost $638.38 million, or $11.17 a share, on $9.62 billion in sales. In 2006, the company earned $276.63 million, or $4.74 a share, on $9.92 billion in sales.

Monday, January 28, 2008

UPS Freight Workers in West Virginia Sign Cards to Become Teamsters

Teamsters gaining members at UPS unit

Since the Teamsters began working to organize 12,600 United Parcel Service of America Inc.'s UPS Freight truck drivers and dockworkers two weeks ago, 2,500 have signed up to join.

UPS Freight, formerly Overnite Express Inc., is based in Richmond, Va. Repeated union organizing drives at Overnite had failed for more than 50 years, until employees at the company's Indianapolis location voted to join in July 2006.

"As more and more cards are submitted to the arbitrator for certification, more and more workers are on their way to a more secure future at UPS Freight," said Jim Hoffa, president of the International Brotherhood of Teamsters.

Teamsters Vice President Ken Hall, who is also president of Local 175 in South Charleston, is leading the "card-check neutrality" campaign to organize UPS Freight employees across the country.

Those employees include 78 who now work at UPS Freight docks in Nitro, Bluefield, Parkersburg and Fairmont.

Hall is also the union's leading contract negotiator for 238,000 Teamster members working for United Parcel Service, which specializes in delivering small packages to homes and businesses. (UPS Freight handles larger freight shipments for businesses.)

Full Story....

YRC posts huge losses for quarter, year

YRC Worldwide Inc. posted a $735.8 million loss in the fourth quarter, a 1,682 percent plummet from earnings of $46.5 million during the fourth quarter of 2006.

For the year, YRC (Nasdaq: YRCW) had a loss of $638.4 million, down 302 percent from earnings of $276.6 million the year before, the Overland Park-based transportation service provider said in a Monday release.

"The economic environment was challenging throughout 2007, and it was increasingly so in the fourth quarter," CEO Bill Zollars said in the release.

Loss per share in the fourth quarter was $12.99, compared with earnings of 80 cents a share a year earlier. For the year, loss per share was $11.17, compared with earnings of $4.74 in 2006.

Thirteen analysts surveyed by Thomson One Analytics had a consensus earnings estimate of 54 cents a share for the fourth quarter, and 11 analysts estimated earnings per share of $2.34 for 2007. Full Story......

UPS Freight Workers in New York Sign Cards to Become Teamsters

An Overwhelming Majority of Workers Seek to Join Local 707 In Hempstead

An overwhelming majority of about 300 workers at the UPS Freight (formerly Overnite Transportation) terminals in Farmingdale and Newburgh, in New York state, have signed authorization cards to become Teamsters, bringing the total number of drivers and dockworkers seeking to join the union to about 2,800 since January 16, Teamsters General President Jim Hoffa announced.

The Farmingdale and Newburgh workers are seeking to join Local 707 in Hempstead.

“This is a momentous occasion for the UPS Freight workers and Local 707,” said Kevin McCAffrey, President of Local 707. “Many of these workers have been involved in the struggle to gain union representation for more than 10 years. Every Teamster and especially our newest UPS Freight Teamsters should thank these courageous men and women who stood up for their right for Teamster representation.”

“I want to thank the Newburgh and Farmingdale workers for staying united and focused on their goals,” said Ken Hall, Director of the Teamsters Package Division. “They soon will be able to negotiate a Teamster contract.”

In addition to the New York state workers, a majority of UPS Freight workers in Louisville and Lexington, Kentucky; Milwaukee, Minneapolis, Southern California, Oakland, Seattle, New England, Memphis and Detroit have submitted cards to become Teamsters.

Sunday, January 27, 2008

John Edwards Statement On 2007 Increase In Union Membership

Senator John Edwards released the following statement about today's release from the Bureau of Labor Statistics, showing the largest increase in union membership since 1979.

"I salute the courage, tenacity, and success of the men and women who have joined the labor movement in historic numbers over the past year, and in doing so, have helped strengthen the middle class in America. I have stood on countless picket lines and in the trenches of organizing campaigns across this country with strong men and women who simply seek fair pay, decent benefits, and a voice on their jobs. But I know too well the ongoing harassment that these Americans face for seeking unionization, and as we struggle with difficult economic times, I will fight even harder to make it easier for more workers to join unions through passage of the Employee Free Choice Act, by calling on employers to be responsible and law abiding, and by continuing to stand with workers in their campaigns."

ABF Eyeing Fort Wayne For Expansion

Beer distributor, truck firm eye Washington Center rezoning for growth

A local beer distributor is preparing for the day its bubbling operation will spill out of its east-central Fort Wayne complex.

AALCO Distributing Co. Inc. wants to buy a 26-acre Washington Center Road property and move there in three to five years, Chief Financial Officer Deb Niezer said. The Fort Wayne-based company plans to sell a section of the site, called Elliott Industrial Park, to trucking company ABF Freight System Inc., which would build a truck terminal at the site.

The site – on the south side of Washington Center Road, west of Goshen Road – appealed to both AALCO and ABF because of its proximity to Interstate 69. AALCO delivers beer and water to businesses in Allen, Adams, Wells and Huntington counties.

“It’s located on major highways that will allow us to go in all directions,” Niezer said.

ABF wants to be near its clients to minimize expenses, said Walter Echols, vice president of real estate for the Fort Smith, Ark.-based trucking company. This site offered that advantage. ABF currently operates a truck terminal on Wells Street. The company would move to Washington Center Road if a proposed rezoning is approved and the sale is finalized, he said.

Fort Wayne Plan Commission members have scheduled a hearing on the project Monday. The plan commission and the City Council will decide whether to rezone the residential property for general industrial use. The plan commission hearing will be at 7 p.m. Monday in Room 126 of the City-County Building.

AALCO plans to build an 80,000-square-foot headquarters at the site, Niezer said. It would include offices, warehouse space and an area where workers would load cases of Anheuser-Busch products, other beers and water onto trucks. The company has not calculated how much it will invest to build the headquarters, she said.

When AALCO last expanded in 2005, the company built on the remaining land at its Grant Avenue location, Niezer said. The Washington Center Road site would give AALCO, a third-generation family business, room for future expansion.

The company’s proposed headquarters would be about 20,000 square feet larger than its current 60,000-square-foot complex, Niezer said. The company’s operations are split among six buildings on Grant Avenue. In the new location, the warehouse and offices would be under one roof.

“It allows us to expand and provides efficiencies for our business,” she said.

AALCO employs about 65. The company eventually would add workers at the new site, but Niezer said the exact number is undetermined.

ABF wants to build a 48-door truck terminal, according to the application filed with the city. The 26,000-square-foot building would also include office space. Construction could start this year, according to the application. Echols said no construction timeline has been set because the project is in the preliminary stages.

The trucking company employs 25 in Fort Wayne, Echols said, and the West Washington Center Road site would offer space for future growth. The company has not determined how many employees it would add or the project cost, he said.

ABF’s Wells Street location is just south of the local Edy’s Grand Ice Cream plant addition. The company announced in June it would invest $29.5 million to build another NestlĂ© Drumstick production line there. Edy’s representatives did not return calls seeking comment last week.

If ABF moves to another location, its Wells Street property could be attractive to many users, including Edy’s, said Rob Young, president of the Fort Wayne-Allen County Economic Development Alliance. The site is close to Glenbrook Square and other Coliseum Boulevard amenities, downtown and highways.

“I think you’ve seen a lot of activity in the area,” he said.