Smid: YRC Ready to Take Back Freight

Shippers returning to fully integrated trucking company

The rush by shippers away from trucking heavyweight YRC Worldwide in response to the company’s fragile financial and operating position – both real and perceived – has shifted into reverse, according to Michael Smid.

Smid, president of the company’s long-haul division YRC, said that after a bumpy two weeks of integrating Yellow Transportation and Roadway the carrier is ready to take back business lost to competitors over the last six months.

“I’m sure shippers at any given time may have moved portions of their freight to other carriers,” Smid said. “But we have seen a substantial portion of that return, and as we pass through this third week (of the integration), we expect to get back more.”

During the first few days of the cut-over to a single operation at the beginning of March, Smid said, the company was answering more than 50,000 calls per day from concerned customers as customer service and dock workers got used to the new computer system. Average wait time for customer service calls is now down to less than 40 seconds, and pick up and rate quote calls are down to less than 10.

In addition, special guaranteed shipments are now running at a 98 to 99 percent on-time performance level, with standard service at 95 percent, Smid said. “These performances indicate we are ready and able to handle any and all time-based requests.”

USF Holland Shuts Down 11 Terminal

YRCW subsidiary copes with weak freight demand throughout system

YRC Worldwide regional less-than-truckload subsidiary USF Holland will close 11 terminals, representing 15 percent of Holland's network, by April 6 to cope with weak freight demand throughout its system.

USF Holland, based in Holland, Mich., has been pummeled by the decline in the automotive industry over the last several years and by increasing competition from large and small regional carriers pushing into its market. In early 2008, the company was forced to retreat from previous expansion into the southeast in the face of stiff competition and declining revenue.

USF Holland terminals that will shut down are in Richmond, Va.; Wichita, Kan.; Albany and Syracuse, N.Y.; Allentown, Bedford, DuBois, Harrisburg, Wilkes-Barre, and Philadelphia, Pa., and Baltimore.

Regional LTL New Penn and YRC, the newly branded long-haul network, will begin making delivers on behalf of Holland beginning April 6. Holland will continue making pickups at the 11 affected locations through April 2, YRC said.

YRC expects to get $25 million to $30 million in annual savings at the regional division, while incurring $8 million to $10 million of one-time shutdown costs, according to documents filed with the SEC.

The Holland closings come a day after competitor FedEx Freight posted a loss of $59 million on revenue of $914 million in its fiscal third quarter.
“We believe USF Holland's terminal closures and FedEx Freights (third quarter) results highlight a very challenging LTL marketplace,” said Wachovia’s Justin Yagerman. “Unfortunately for the industry, we view these terminal closings as a rationalization of under-utilized capacity and not an opportunity for freight to be redistributed to the industry.”

Hoffa Denounces Mexican Tariff Threat Over Unsafe Trucks

Teamsters General President Jim Hoffa today said the Mexican government's threat to raise tariffs on U.S. exports is an absurd overreaction to the shutdown of the unsafe cross-border trucking pilot program.

Congress ended the program as part of the recent Omnibus appropriations bill.

"The right response from Mexico would be to make sure its drivers and trucks are safe enough to use our highways without endangering our drivers," Hoffa said. "The border must stay closed until Mexico holds up its end of the bargain."

According to published reports, the U.S. government spent $500 million on the pilot program, which began in September 2007. Only about three Mexican trucks per day traveled beyond the border zone since then, according to the Transportation Department's office of inspector general.

"The U.S. needs to stop agreeing to trade deals like NAFTA that allow our own safety standards to deteriorate," Hoffa said.

The challenging world of LTL freight in 2009

While all segments of the transportation industry are being hit hard by the current recession, the LTL sector is feeling the full force of the economic downturn. To pick up, consolidate, line haul, deconsolidate and deliver less than truckload shipments throughout a geographic area requires an asset heavy business model. LTL carriers require terminal networks to cross-dock, load and unload shipments to build cost effective loads. They require local pickup and delivery units and line haul vehicles to go from city to city. In this blog we will look at some of the developments currently unfolding in this industry.

Freight Volumes Declining Faster that Truck Capacity

As the Obama administration actively moves forward with an economic stimulus package to revive the ailing U.S. economy, the freight transportation market is still feeling the pain. The Institute for Supply Management reported its twelfth consecutive month of manufacturing contraction in the month of January. Based on the most recent truck tonnage index release from the American Trucking Associations (ATA), its advanced seasonally-adjusted For Hire Truck Tonnage Index sank 11.1 percent in December, representing the largest month-to-month reduction since April 1994, when the unionized less-than-truckload industry was in a labor strike. The ATA added that December’s tally marks the third largest single monthly drop since the ATA began collecting tonnage data in 1973.

According to John Larkin, Managing Director, Stifel Nicolaus, demand for LTL services is falling faster than the supply. The pattern of deteriorating LTL freight volumes has been ongoing for the past 3 quarters. LTL carriers have not been able to adjust capacity downwards to keep pace with the falling demand.

Same Number of Pickups, Smaller Size Shipments

From discussions with various LTL truckers, the phenomenon of lower weight LTL shipments appears to be happening across North America. As demand and confidence wane, shipment sizes are diminishing. This poses a challenge to LTL carriers since they cannot reduce driver wages or fuel consumption proportionately to the drop in shipment sizes or number of shipments.

More Direct to Destination Loadings

As LTL carriers seek to reduce costs and speed up transit times, they have been loading more trailers direct to destination rather than through their breakbulk networks. This process has been ongoing for several years and will likely receive a boost from the weak economy.

Capacity Consolidation

YRC is in the midst of consolidating its Yellow and Roadway LTL divisions. They are planning on removing up to 200 terminals by the end of the first quarter. YRC’s freight is being actively solicited by its competitors as they offer shippers a “safe haven” from a potential bankruptcy or chapter 11 filing.

Other trucking companies have announced terminal reductions of a smaller magnitude. These reductions along with the Jevic and Alvan failures in 2008 have removed some additional LTL capacity. The estimate is that there has been an approximately 13 percent reduction in capacity due to terminal closures and carrier failures.

ABF, long one of the best performing long haul carriers has hired a consultant to help them seek out potential acquisition candidates. For those companies with strong balance sheets, this is a time to add density at an attractive price. Full Story....