YRC shifts load during drive to stability

YRC Worldwide Inc. has battened down the cost hatches, a massive ship trying to stay afloat in the face of a stormy economy.

Efforts to accomplish that included a string of layoffs during 2008, mostly in response to a freight downturn that began in late 2006. It cut more than 12 percent of its work force, going from 63,000 employees at the end of 2007 to about 55,000 at the end of 2008. Overland Park-based YRC, which has about 2,000 local workers, shoves into 2009 buoyed by expectations of $500 million in savings from across-the-board pay reductions and the integration of its Yellow and Roadway units.

The savings position makes CEO Bill Zollars optimistic.

“The challenges are going to be the same for everyone in the industry,” he said. “But the opportunities are unique to us. ... This closes the gap with competitors from a cost standpoint, and at the same time, customers will be able to get better service through one integrated network.”

This year will bring more job cuts, he said. By March, the ax will fall on positions affected by the Yellow-Roadway integration.

JP Morgan analyst Thomas Wadewitz predicted in a Feb. 2 note that 10 percent to 15 percent of the 37,000-member Yellow and Roadway work force would need to be cut this year as freight tonnages fall further. That could save $455 million, he estimated.

Although YRC has plenty of cost-saving potential, last year’s cuts didn’t keep it from reporting a $974.4 million loss for 2008 and a 7 percent drop in revenue to $8.94 billion. The results included write-downs of $141 million for the Roadway trade name and $59 million for YRC Logistics.

YRC had a fourth-quarter loss of $244.4 million on revenue of $1.93 billion.

“The biggest impact on all players in our industry has been the economic downturn,” Zollars said. “The reality is that because we’re the biggest, we have the most infrastructure and therefore the most operating leverage, and therefore we’re hit the most.”

Analysts haven’t put any wind in YRC’s sails. Wadewitz slashed his 2009 earnings-per-share estimate for YRC from $1.07 to a loss of $3.30.

Although YRC “has very significant drivers of cost reduction in place for 2009,” he wrote, with revenue sinking at an alarming pace, the company will find it difficult to realize a quick improvement in earnings-per-share performance. Full Story......