Friday, January 30, 2009

YRC CEO: Volume May Be Bottoming; Rules Out Bankruptcy

Trucking giant YRC Worldwide Inc. weighed in on the steep slump in freight volumes Friday, with Chief Executive Bill Zollars voicing some optimism that the industry-wide trend at least may be bottoming.

"The percentage declines year-over-year have started to stabilize" in the early weeks of 2009, Zollars said in an interview. "Believe me, we're looking really hard for any sign of improvement."

Meanwhile, Zollars reiterated that bankruptcy isn't being considered as an option for debt-laden YRC. He said talks aimed at relaxing some debt covenants have been proceeding well with lenders and should be successfully completed by mid-February.

YRC shares were trading recently at $3.01, off 3.8%, after falling about 20% Thursday.

Shipping volumes have been on the wane for some time industry wide, but freight haulers - including fellow trucking companies J.B. Hunt Transport Services Inc. and Con-way Inc., as well as top U.S. railroads - have reported that the trend accelerated in the fourth quarter, in line with the deteriorating economy. Most have been hesitant to call a bottom.

Zollars concurred that the overall economy "definitely decelerated" in the fourth quarter, noting that YRC's freight volumes "progressively weakened" each month. Per-day tonnage for YRC's national segment dropped 15% in the quarter, with its regional business seeing a 14% drop when adjusted for network changes that took place early this year.

But Zollars said the trend "looks like it has stabilized" since the end of the year, particularly when adjusted for poorer weather conditions this winter.

Still, he said YRC isn't planning for an economic recovery in 2009 and still assumes freight volumes will be down overall from 2008 levels. YRC has been experiencing pricing pressure as well - with prices down an average 1.5% in the fourth quarter - although Zollars said he expects YRC to do better on pricing than the trucking sector overall this year.

Additional insight on the outlook for industry freight volumes likely will come Tuesday, when United Parcel Service Inc. (UPS), the largest U.S. package shipper, posts fourth-quarter earnings.

The UPS results are coming on the heels of a report Thursday indicating that international air cargo fell 23% in December from a year earlier, signaling a broader slump in global trade. The report from the International Air Transport Association includes freight on both passenger carriers and all-cargo carriers.

YRC, created through a 2003 combination of the Yellow and Roadway trucking brands, logged fourth-quarter results late Thursday, posting a narrower net loss on fewer write-downs.

The company's net loss came in at $244.4 million, or $4.14 a share, compared with a year-earlier net loss of $735.8 million, or $12.99 a share. Excluding write-downs, which in the latest quarter included charges related to the Roadway trade name, the loss was $1.63 a share.

Revenue dropped 18% to $1.93 billion.

On average, analysts surveyed by Thomson Reuters projected a 66-cent-a-share loss and revenue of $2.04 billion.

YRC has $1.36 billion in debt, a portion of which it has been struggling to refinance. But because of a sinking bottom line, the company is at risk of falling out of compliance with credit lines and has been working to renegotiate covenant

Change to Win Statement on President Obama's Executive Orders for Working America

Change to Win chair Anna Burger released the following statement today regarding President Obama's White House ceremony to sign four worker-related executive orders into law, including the creation of the Middle Class Working Families Task Force led by Vice-president Joe Biden.

"Change to Win, its seven unions and six million members, applaud President Obama and Vice-President Biden for continuing to stand up for working families by taking bold actions to restore the economy, rebuild the middle class and renew the American Dream. Today's executive orders are further proof that when workers vote for pro-worker candidate, workers win.

"Today, the Obama administration reaffirmed its commitment to America's workers. Taken together, these orders show that the administration recognizes the federal government's responsibility, as the nation's largest purchaser of goods and services, to set model employment standards for private sector workers, as well as for the direct federal workforce.

"Millions of American families are facing tough decisions when they gather around the kitchen table trying to find how to survive the economic recession. Can they pay for their health care bills as well as the home over their heads? Will they ever be able to retire or will their golden years be spent working at the Golden Arches? Workers' wages are the single largest source of consumer spending. Stimulating worker wage increases will help drive consumption and generate economic growth.

"The mandate of the Middle Class Working Families Task Force sends a clear signal of a new government. A government that makes sure working Americans are treated with the dignity and respect at the work place that everyone deserves. A government that understands that rebuilding the American Dream and fixing the economy means creating more than just jobs, it means creating good jobs with a wage that can support a family, benefits that can keep them healthy, and a secure and dignified retirement.

"We look forward to working with the new administration and Vice-President Biden on the Middle Class Working Families Task Force. Vice-President Biden has proven time and again his leadership and commitment to workers' issues and we are honored for the chance to work alongside him. On behalf of the growing numbers of workers who belong to unions as well as the millions more who are struggling to secure a fair voice in the workplace, we must explore every avenue available to create change that works now and for generations to come."

When No One Is Shipping Goods, No One Is Buying Them

One of the largely hidden signs of the progress of the recession is whether goods are being shipped from one city to another and from one country to another. What is not shipped is not put up for sale.

Fedex and UPS have said that their businesses are faltering, but the situation may be getting much worse than that.

According to the FT, "The International Air Transport Association said traffic volumes fell 22.6 per cent year-on-year in December. Air freight accounts for 35 percent of the value of goods traded internationally."

While global trade is certainly not off 35%, the numbers could point to a 10% drop, which would be unprecedented.

The news is particularly bad for China, and, to a lesser extent, the US. China's export growth is already slowing. If those numbers begin to contract, the GDP movement of the world's most populous nation is likely to move toward negative numbers. A recession in China will hurt the rest of the global economy in part because China is an importer of goods for its large middle class. Sales to the to that group are a part of the revenue of a number of American companies.

The US is still a tremendous exporter and the global recession will hurt that. If the air freight numbers are an fair indication, those exports are slowing to a crawl.

Thursday, January 29, 2009

Arkansas Best swings to Q4 loss, cuts 1,100 jobs

U.S. trucking company Arkansas Best Corp. swung to a surprise fourth-quarter loss and said it slashed about 1,100 jobs in the period as the U.S recession brought "unprecedented weakness" to its business, pushing down both freight volumes and prices.

"We are now over 27 months into a freight recession that is the worst I have seen during my 37 years in this industry," Chief Executive Robert Davidson said in a release.

The Ft. Smith, Arkansas-based company reported a quarterly net loss of $11 million, or 44 cents per share, compared with net income of $13.5 million, or 54 cents per share, in the year-ago period.

Conditions have been tough for U.S. trucking companies since the third quarter of 2006. Falling auto sales, lackluster retail sales and a slumping housing market have choked off demand for trucking services.

According to investment banking firm Avondale Partners, 3,065 trucking firms filed for bankruptcy in 2008, compared with less than 2,000 in 2007. The highest annual bankruptcy rate so far came during the last U.S. recession in 2001, when 3,990 truck firms went under. Full Story......

YRC loses $974 million in 2008

YRC Worldwide Inc. reported a loss of $974.4 million in 2008 and a 7 percent drop in revenue compared with 2007.

In a release after the market closed on Thursday, the Overland Park-based company reported a loss of $16.92 a share for its fiscal year, which ended Dec. 31. This compares with a loss of $638.4 million, or $11.17 a share, in 2007.

Revenue in 2008 was $8.94 billion, down from $9.62 billion in 2007.

For the fourth quarter, the company reported a loss of $244.4 milion, or $4.14 a share, compared with a loss of $735.8 million, or $12.99 a share, a year earlier. Revenue for the quarter was $1.93 billion, down 18 percent from $2.35 billion a year earlier.

The company recorded a fourth-quarter impairment charge of $141 million for its Roadway trade name related to the company’s introduction of a new YRC brand for the integrated network of Yellow Transportation and Roadway. The impairment charge also included goodwill of $59 million at YRC Logistics.

YRC has had quite a ride in the past year, including layoffs, a pay cut for its employees who are International Brotherhood of Teamsters members and the accelerated integration of Yellow and Roadway.

“Our results reflect the significance of the economic recession that has been longer and deeper than anyone anticipated,” Chairman and CEO Bill Zollars said in the release. “Although we were not pleased with this level of performance, it was consistent with our internal expectations and those of our banking group. The discussions with the banks are progressing well, and we are on track to finalize an amendment by mid-February.”

Zollars said that the network integration at YRC is on track to deliver a run-rate of $200 million of operating income improvement by early in the fourth quarter of 2009 which, combined with the employee wage reductions of about $300 million, leave the company expecting to improve its financial performance by more than $500 million going into 2010.


Pension and Welfare Funds Being Transferred

Teamster local unions across the country have informed KeyBank of Cleveland, Ohio, that they intend to end their financial relationship with the bank. KeyBank and its parent company, KeyCorp, are the primary lender for Oak Harbor Freight, based in Auburn, Washington, where more than 600 Teamster members have been on strike for the past four months.

In a letter addressed to local unions from Florida to Washington, Teamster President Jim Hoffa asked that they contact KeyCorp immediately and begin the process of transferring their business to a comparable service provider.

“KeyBank, which operates branches in several states, is playing a critical role in the ongoing dispute by providing funds that allow Oak Harbor Freight Lines to survive,” Hoffa said.

Teamsters started bargaining for a new contract with Oak Harbor in October 2007 and so far the union negotiators have met with management over 25 times. Union members went on strike on September 22, 2008 to protest Oak Harbor’s violations of American labor laws. This is the first strike in the five decades that Teamsters have represented employees of Oak Harbor Freight.

It is estimated that local Teamster unions and sister unions maintain approximately $18 billion in assets through KeyCorp and its subsidiaries.

“KeyBank doesn’t want to help Washington families,” said Al Hobart, International Vice President for the Western Region. “Our members have been forced to strike because Oak Harbor, the company they’ve devoted their lives to, has committed numerous Unfair Labor Practices and by their actions have shown their lack of social conscious toward their employees.”

Wednesday, January 28, 2009

Union membership rises for second straight year

Union membership jumped to 12.4 percent of the nation's work force last year, despite widespread job losses in a troubled economy.

The ranks of organized labor rose by 428,000 workers in 2008, the biggest annual gain since the government began compiling such data in 1983, the Bureau of Labor Statistics reported Wednesday.

It's also the second year in a row that unions have added to their ranks. Membership rose by 311,000 members in 2007, to account for 12.1 percent of workers.
Overall, union membership remains well below the peak of 35 percent during labor's heyday of the 1950s. Membership was about 20 percent in 1983, the first year the bureau began compiling the numbers.

Unions have moved aggressively to bolster organizing efforts in recent years, a move that apparently offset the loss of 2.6 million jobs from payrolls in 2008. The Teamsters Union, one of the nation's largest unions, had its most successful organizing year in decades, with more than 43,000 workers joining.

Gary Chaison, a labor specialist at Clark University in Worcester, Mass., said the figures show the steady decline in union membership might have bottomed out.

"I think the unions are still vulnerable," Chaison said. "It's almost as if they've settled down, but there really hasn't been any major growth spurt yet."

Public sector unions accounted for most of the increase last year. The union membership rate for government workers rose to 36.8 percent from 35.9 percent in 2007. In the private sector, membership remained steady as union ranks inched up to 7.6 percent from 7.5 percent in 2007.

Unions are hopeful they could experience even more of a resurgence if Congress passes legislation this year making it easier for workers to organize unions. The Employee Free Choice Act would give workers the option of forming a union by simply signing a card or petition instead of holding secret ballot elections.

The bill passed the House in 2007, but did not survive a Republican filibuster in the Senate. With Democrats expanding their majority in the Senate, union leaders say they are close to securing the 60 votes needed to break a filibuster. Businesses are mobilizing fierce opposition, arguing that without secret ballot elections, workers will be open to union bullying tactics.

Chaison cautioned that Wednesday's data could fuel arguments against the card check bill.

"It will be difficult for unions to claim that they can't organize enough to offset declining employment because they've managed to do it over the last two years," Chaison said.

But Stewart Acuff, special assistant to AFL-CIO president John Sweeney, says union surveys show nearly 60 million people would join a union "if there was no fear and intimidation."

Business groups, already reeling from the economic crisis, claim passage of the card check bill will put many of their members out of business.

The Ship is Listing, Customers are Fleeing but, Wait, You Have to See This Nifty Logo

Implications: YRC Worldwide, as part of its merging of long-haul LTL units Roadway and Express and Yellow Transportation, is rolling out a new logo that simply reads "YRC." It contains the familiar swamp holly orange color of Yellow and the royal blue that Roadway used. The former Yellow Corp. bought Roadway in 2003 for $1.1 billion to create YRC Worldwide, and is part of the reason YRC is now struggling under the weight of more than $2 billion in long-term debt.

Analysis: Maybe they should have just used a $$$ sign for a logo. It might be a constant reminder of why everybody is running all these trucks in the first place.

Financially ailing YRC Worldwide, in a stunning use of priorities, is rolling out a new logo "YRC" to help identify the former Yellow and Roadway companies on their trucks.

Now, maybe I should admit my prejudices right here. I am not a big fan of logos. Except for maybe the interlocking N and Y on the cap of the New York Yankees baseball team, all logos more or less look the same to me.

Of course, then again, I don't do marketing for a living. Greg Reid does. He is the "chief marketing officer" of YRC and he effuses in this story about the "heritage" brands of Yellow and Roadway.

All well and good. But this is a company that is dangerously close to bankruptcy, its workers are giving back 10 percent of their salaries to stay on the job, the company has lost more than 85 percent of stock value in a year and has posted losses in four of the last five operating quarters.

And they're worried about logos?

More from Reid: "A brand is not an identity. A brand is a promise, a promise in the market place. Visual identity is just one part of what makes up a successful brand."

So is making money, earning a successful return on investment for shareholders and serving one's customers.

Maybe I'm being too harsh here. But the job of combining the long-haul Teamster-covered networks of Roadway and Yellow is tough enough, and should require all of management's attention full time. A logo can be designed later, after the company is out of the financial woods.

And make no mistake: YRC is still in deep financial trouble.

Analyst Ed Wolfe of Wolfe Research has combed YRC's most recent 8-K filing with the SEC and finds YRC has many conditions placed on it not just for performance covenants but also to waive in case of a default or a late payment.

This temporary waiver expires on Feb. 17, and includes the reduction of YRC credit from $600 million to $500 million. The waivers also restrict YRC from executing asset sales of above $30 million, except for its previously announced $150 million pending sale/leaseback of some large terminals. The waivers also terminate if YRC incurs more than $30 million of additional indebtedness, makes any acquisitions, fails to deposit cash proceeds from any asset sale into an account maintained by the administrative agent under the credit agreement, according to Wolfe.

Wolfe wrote in a note to investors that he rates YRC has having a "high risk of some form of bankruptcy" within the next three months or so.

Let's hope the design team that did the nifty new logo is part of the secured creditors of YRC.

Tuesday, January 27, 2009

U.S. Truck Tonnage Off 11.1 Percent in December

Implications: U.S. trucking companies are facing the roughest operating environment perhaps since deregulation in 1980. The American Trucking Associations' seasonally adjusted truck tonnage index for December was off 11.1 percent, its largest month-to-month reduction since April 1994. That drop occurred when the Teamsters struck a handful of LTL companies. December's drop was the third-largest single-month drop since ATA began collecting this data in 1973.

Compared with December 2007, the index declined 14.1 percent. That's the biggest year-over-year decrease since February 1996. During the fourth quarter of 2008, tonnage was off 6 percent compared with the fourth quarter of 2007.

Analysis: It's scary. Freight demand fell off in December like a skier going down a mountain. The 11.1 percent decline in December is the largest single-month drop since April 1994, according to the American Trucking Associations.

It was also the third-largest single-month drop since the ATA began collecting this data in 1973.

By my count, this freight recession/depression began in August 2006. That would make 30 months by the end of January, one of the longest and most stubborn declines in trucking industry history.

No wonder fleets are shedding capacity. When one hears top-flight carriers such as Heartland Express, perennially one of the most profitable truckload carriers in the country year in and year out, thinking about downsizing that automatically is cause for concern.

Of course, Heartland is not along. Already, the likes of J.B. Hunt, Werner Enterprises, Knight Transportation and Swift Transportation have shed 10 percent or more of their over-the-road capacity since January o of 2007.

And 2009 doesn't appear to be starting any better than 2008 ended.

According to a press release from Heartland Express: "The quarter is off to a dismal start."

Truckers are getting a slight break in fuel, but that too is a double-edged sword. Because of the lag in fuel surcharges, many carriers are facing steep declines in revenue as their fuel surcharges are being cut in half or more.

While truckers have more ability now to shed capacity and cut costs than they ever have had in the past, there is not much carriers can do to restore profitability until the overall U.S. economy starts to improve.

As ATA Chief Economist Bob Costello, a steady hand, put it: "Motor carrier freight is a reflection of the tangible-goods economy, and December's numbers leave no doubt that the United States is in the worse recession in decades. It is likely truck tonnage will not improve much before the third quarter of this year."

Overall Gross Domestic Product is expected to contract in both the first and second quarters of this year and grow only slightly in the third and fourth quarters, economists predict.

That begs the question: how many marginal carriers will be able to handle these headwinds before declaring bankruptcy this year?

Monday, January 26, 2009

43,000 jobs are eliminated in latest wave of U.S. layoffs

It was a bleak start to the workweek for thousands of American workers.

Several corporations said Monday morning that they would cut a total of 43,000 jobs in an attempt to slash costs to survive a recession that has taken a toll on new orders, profits and companies' outlooks for growth.

The cuts announced Monday included 20,000 jobs at the heavy-equipment manufacturer Caterpillar; 8,000 at the wireless provider Sprint Nextel, and 7,000 at Home Depot and 8,000 from the expected merger of the pharmaceutical makers Pfizer and Wyeth. Some smaller layoffs were also announced.

President Obama cited the layoff announcements in remarks Monday morning urging Congress to approve an $825 billion economic stimulus package of tax cuts, emergency benefits and public spending projects.

"These are not just numbers on a page," Obama said. "As with the millions of jobs lost in 2008, these are working men and women whose families have been disrupted and whose dreams have been put on hold. We owe it to each of them and to every single American to act with a sense of urgency and common purpose. We can't afford distractions and we cannot afford delays."

Monday's announcements were only the latest in a grim parade of job cuts from employers from Wall Street to wireless providers to computer companies to retail stores.

The United States economy has shed some 2.59 million jobs since the recession began in December 2007, and unemployment rose to 7.2 percent last month. Economists worry that the economy could now be shedding as many as 600,000 jobs a month, and they said Monday's layoff announcements served to underline the stricken state of the labor market. Last week, the government reported that first-time unemployment claims had risen to 589,000 for the week ending Jan. 17, tying an all-time high set in December.

"This is a big deal," said Dean Baker, a director of the Center for Economic and Policy Research. "We're losing jobs at an incredibly rapid rate, and even with that, I'm worried they're accelerating. We're seeing a much more rapid rate of layoff announcements."

Caterpillar, which has been hurt by falling orders for construction and mining machinery, said Monday morning that it would cull 20,000 workers through layoffs and buyouts. It said it would make "sharp declines" in overtime and eliminate scores of temporary and contract jobs.

The company said 2009 would be one of its weakest years since World War II.

"These are very uncertain times," the chief executive, James Owens, said in a statement. "While it's painful for our employees and suppliers, it's absolutely necessary given economic circumstances. We expect to have most of the actions needed to lower employment and cost levels in place by the end of the first quarter."

"We were whipsawed in the fourth quarter as key industries were hit by a rapidly deteriorating global economy and plunging commodity prices," Owens said.

The wireless provider Sprint Nextel said its 8,000 job cuts were part of a plan to trim labor costs by $1.2 billion, and said most of the cuts would be completed by March 31. About 850 of the job cuts are expected to come through buyouts, which will cost the company $300 million in severance costs and related expenses.

"Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment," Sprint's chief executive, Daniel Hesse, said.

Home Depot, the country's largest home-supply chain, said it would cut 7,000 jobs, about 2 percent of its work force, and close its high-end EXPO home design stores.

YRCW announces next steps in Yellow Transportation, Roadway network intregration

More than four months after announcing plans to integrate its two largest subsidiaries—Yellow Transportation and Roadway—less-than-truckload transportation services providers YRC Worldwide Inc. announced the new brand name for the combined Yellow Transportation and Roadway network is YRC.

Last September, YRCW announced its intention to hasten the integration strategies of Yellow Transportation and Roadway, due to what company Chairman, President, and CEO Bill Zollars described as a positive customer response from meshing its sales teams, coupled with the economic downturn creating the capacity in the company’s networks that is needed to effectively integrate its operations, while improving service reliability and speed. And he added at the time that by offering a comprehensive service portfolio though one network would be a better tool to effectively serve customers.

YRCW officials said the YRC is “ahead of schedule to successfully integrate its national networks by early spring.” They added that since October approximately 80 shared service centers have been opened to manage the combined network and serve as a single interface fore Roadway and Yellow Transportation customers.

And when the network integration is complete, there will be around 450 YRC service centers, representing roughly 100 more service centers than the individual Roadway and Yellow networks. Company officials noted that in major metropolitan areas, the nearest YRC facility will be 20 percent closer to customers, allowing for quicker pick-ups and deliveries, increased flexibility, and reduced emissions, and they said that as part of the integration process YRC has added more than 21,000 direct new service points.

While the Yellow Transportation/Roadway integration has been in motion since September, the original plan was to keep the Yellow Transportation and Roadway names to maintain their own brands and presence in the LTL sector. And by operating one national network, YRCW said last year that it expects to increase its network density, with the result being lower fixed-costs and service improvements. The integration is expected to last through 2009 and result in more than $200 million in annual operating savings.

In a September interview with Logistics Management,YRC North American Transportation President and CEO Mike Smid said these savings will come from various sources. One being consolidating the number of facilities it operates out of from 650 to roughly 450, as it combines capacity in existing facilities as part of YRCW’s “one network, one operation” approach with this integration. Another area where savings will come from, said Smid, is local pickup and delivery handling.


The following is an official statement from Teamsters General President James P. Hoffa.

“Wilma Liebman served the Teamsters with distinction for nine years prior to embarking on her distinguished career in public service. I am so proud that President Obama designated her to take on this vitally important role as chairman of the National Labor Relations Board.

“American workers desperately need the NLRB to restore balance and fairness in the workplace. Wilma is the right person to lead the board on that mission.

“She understands that the NLRB’s role is to protect the rights of employees who want to join a union – a responsibility the Bush-dominated board abandoned during the past eight years. Wilma understands the obstacles that American workers must surmount to join a union. She will bring her sense of fairness and decency to the job.

“President Obama must still nominate three additional members to the board. I am confident that his appointees will restore the board into the honest broker of differences between employees and their employer that it has been for most of the past 75 years.

“The labor movement is looking forward to an NLRB that is no longer stacked against workers.”