Friday, August 07, 2009

Teamsters Ratification of Contract Changes Moves YRC Worldwide Comprehensive Plan Forward

Immediate cost savings from modified agreement estimated at $45 million monthly, increases to $50 million monthly in 2010

Company signs additional asset sale contracts with NATMI for $81 million

YRC Worldwide Inc. announced today a major step forward in the company's comprehensive plan, with a majority of its employees represented by the International Brotherhood of Teamsters voting '"yes" to ratify a modified labor agreement.

"With the support of our employee-owners and other stakeholders, we continue making progress with our comprehensive recovery plan - realizing efficiencies from the YRC integration, restoring financial strength and positioning YRC Worldwide for future success," said Bill Zollars, Chairman, President and CEO of YRC Worldwide. "The contract changes enable us to reduce our cost structure, preserve capital and be more competitive in the marketplace."

The modified agreement includes a 5 percent incremental wage reduction and an 18-month cessation of union pension fund contributions, which will not require repayment. Related savings from the pension and wage reduction are approximately $45 million per month, and begin immediately. Savings increase to an estimated $50 million per month in 2010.

"Our union employees approached this situation in a very professional manner," said Mike Smid, President of YRC Inc. and Chief Operations Officer of YRC Worldwide. "This vote sends a clear message to our customers and our competitors. We are moving forward together, and we're moving forward with confidence, delivering uninterrupted and unparalleled service in our superior networks."

As with prior ratification elections, a small number of the bargaining units representing less than 10 percent of our Teamster employees did not yet ratify the labor agreement modifications. The company and the Teamsters expect to address employee concerns and have these smaller bargaining units reconsider the modifications in the near future.

Additional Asset Sales Contract Finalized

The company also announced progress on improving its liquidity position by executing contracts with NorthAmerican Terminals Management, Inc. ('NATMI') to sell and simultaneously lease back certain facilities, and to sell additional excess properties. The aggregate sales price is approximately $81 million and the property sales are intended to close during the third and fourth quarters of 2009. Sale and financing leaseback transactions are now expected to generate around $375 million of cash proceeds and excess property sales should generate over $100 million in 2009.

YRC Worldwide will continue to announce updates on its comprehensive plan as developments occur.


Hoffa Says Time For Banks To Step Up

Teamster members who work at the freight companies of YRC Worldwide Inc. Yellow, Roadway and Holland—have approved a Job Security Plan that provides economic relief for YRCW as it works to get through the worst economic crisis since the Great Depression. The modifications were ratified by a 58.5 percent to 41.5 percent margin, with 64 percent of members casting ballots. Ballots were mailed to union members on July 17 and counted today.

“Once again Teamster members at YRCW have shown great courage by making extraordinary sacrifices to help this company survive,” said Jim Hoffa, Teamsters General President.

The Job Security Plan provides YRCW with over $1.2 billion of cost savings over the remaining 44 month term of the agreement and greatly enhances YRCW’s financial position. While the wage reduction and pension terminations are effective immediately, they will not remain in effect unless:

1) YRCW and its bank group amend their loan agreements in order to provide the company with sufficient liquidity and flexibility to complete its restructuring and take advantage of the upturn in freight demand anticipated in 2010; and

2) affiliated Teamster Pension Funds approve the “deferral/termination” arrangement.

“Now YRCW, banks and other stakeholders have to step up and do their part to ensure the company’s long-term survival,” Hoffa said. “Do the banks want the fate of 35,000 YRCW workers, hundreds of thousands of retirees, and hundreds of thousands of other workers to be their responsibility if they do not significantly rework YRCW’s loan facilities?”

The plan calls for a reduction in gross wages of 15 percent from the full National Master Freight Agreement rates effective Aug. 1, 2009. This includes the 10 percent wage reduction previously ratified by the membership in January 2009.

Additionally, the plan will allow the company to terminate pension fund contributions effective from July 1, 2009 through December 31, 2010. During this time, employees will not earn additional pension accruals or credits. At the same time, they will not lose accrued benefits or credits previously earned during this period.

The plan also provides for the issuance of options for YRCW stock to Teamster members that would lead to employee ownership of an additional 20 percent of the company’s outstanding stock over and above the 15 percent that was negotiated at the end of last year.

“As the economy is just now showing signs of improvement our primary goal is to make sure YRCW’s other stakeholders, primarily the bank lending group led by JP Morgan, SunTrust, The Royal Bank of Scotland, Wells Fargo (Wachovia), Bank of America, Bank of Tokyo--Mitsubishi and US Bank, provide YRCW with the necessary liquidity to withstand this recession and ensure YRCW’s long term financial stability,” said Tyson Johnson, Director of the Teamsters National Freight Division.

“I commend our YRCW Freight Teamsters for doing everything that has been asked – over $2 billion in wage and pension relief since January. We’ve done our part to preserve members’ jobs and their benefits, now the other stakeholders have to step up to the plate.”

The vast majority of YRCW Teamsters, who made up 90 percent of the total vote, work under the National Agreement. A handful of separate “white paper” agreements, representing 10 percent of the total number of voters, rejected the plan. As with past contract ratification rejections, those issues will be dealt with on a local by local basis.

YRC Worldwide expects union vote results Friday

Results of a union vote that will play a key role in YRC Worldwide Inc.’s future are expected Friday afternoon.

In a Thursday memo to freight local unions, Tyson Johnson, freight division director for the International Brotherhood of Teamsters, said an overwhelming number of ballots were cast regarding the concessions, meaning sorting would continue Friday morning, with a result announcement likely in the afternoon.

The concessions, the second proposed this year, include forfeiting 18 months of pension payments — which would not have to be repaid — and taking an extra 5 percent wage cut to save the trucking giant at least $45 million a month. YRC offered considerations such as options for an additional 20 percent stake in the company and a union-appointed board seat.

In a July 30 conference call, YRC executives expressed confidence in a positive outcome. Chairman and CEO Bill Zollars called it a “game-changing event” for YRC.

“All eyes now are on the Teamsters,” Jason Seidl, a Dahlman Rose & Co. LLC analyst, said in a Wednesday interview. “If this doesn’t happen, there is no Plan B. B probably stands for bankruptcy.”

In January, workers approved a 10 percent wage cut and were offered a 15 percent stake in YRC.

If the union concessions pass, then bondholders and lenders will have to do their part, and YRC will have to win back some of the business it lost, Seidl said Wednesday.

Last week, YRC reported a $309 million loss in the second quarter. The company has taken steps that include selling property, integrating subsidiaries, closing facilities, laying off workers and amending agreements with lenders in an attempt to ride out the recession.

YRCW Ballot Count

The Independent Election Supervisor has announced that due to an overwhelming number of ballots cast, the YRCW ballot count will not be completed until Friday, August 7, 2009.

The ballots are currently being sorted according to Local Union number and company. The balloting process will resume Friday morning with results expected to be announced Friday afternoon.

Results of the balloting process will be posted on

Tuesday, August 04, 2009

New Penn Introduces New Guaranteed Levels of Precision

YRC Worldwide Inc. announced today that New Penn, one of its regional operating companies, will introduce a new and improved suite of guaranteed service offerings featuring superior reliability and value. All guaranteed service shipments are backed by the New Penn no-hassle guarantee to be complete and on-time or the invoice will automatically be reduced to zero dollars with no need for the customer to file a claim.

One of the primary enhancements is a new guaranteed by 9 a.m. service that provides customers with a level of morning precision that is typically found only with air freight or dedicated delivery carriers.

The other key enhancement is a new day-definite service offering that is guaranteed to deliver by 3:30 p.m., rather than end of day like most competitive offerings. By offering earlier guaranteed delivery times, customers are able to get goods into production or for sale to clients the same day the shipment arrives rather than traditional guaranteed delivery by 5 p.m. in which shipments often cannot be incorporated into the supply chain until the following day.

With the enhancements, the New Penn Guaranteed Precision suite of award-winning service offerings now includes:

Guaranteed Delivery By 9 a.m.
Guaranteed Delivery By Noon
Guaranteed Delivery By 3:30 p.m. (Day-Definite)
Guaranteed Delivery Within a Single-Hour Window
Guaranteed Delivery Within a Multi-Hour Window

"We are constantly reviewing our services in order to provide highly customizable solutions that meet the demands of our customers and their tightened supply chains," said Steve Gast, president of New Penn. "We have aligned the needs of our customers with the highly reliable capabilities of the New Penn network to provide our customers with an expanded set of guaranteed service options - all backed with the no-hassle, New Penn delivery assurance guarantee."

Sunday, August 02, 2009

Is November the End for YRC Worldwide?

YRC Worldwide, the nation's largest trucking company by revenue, continues to post huge losses on declining revenue. The Overland Park, Kan.-based LTL carrier posted a $309 million loss in the second quarter, compared with $35.8 million earnings in the year-ago period, on a 45 percent decline in revenue to $1.33 billion. YRC CEO and Chairman Bill Zollars says he continues to have "guarded optimism" about the future of his company.

YRC Worldwide continues to bleed red ink. Its second-quarter loss of $309 million means the company has lost in excess of $2.1 billion in the last 10 operating quarters.

How long can this continue?

YRC Chairman and CEO Bill Zollars says in a press release announcing the results that he has "guarded optimism" and that his LTL company "appears to have stabilized." Yet he candidly admitted there is no growth prospects for either this year or 2010.

Which begs the question: if not now, when?

The second and third quarters are usually the best times for trucking companies. Most of YRC's rivals either have swung back to profitability (Con-way, for instance) or have narrowed their losses (Arkansas Best Corp.'s ABF Freight System unit)s. YRC has done either.

Zollars insisted to the Wall Street Journal that his company has retained "the vast majority" of its customer base. Yet, his own revenue figures would seem to belie that fact. Revenue fell 45 percent in the second quarter to $1.33 billion. That would mean on an annual basis that YRC, which was about a $9.6 billion company just two years ago, is now on a 12-month run rate to post just over $5 billion in sales.

Perhaps Zollars knows something we don't know. Perhaps at $5 billion YRC will be more profitable than it was at $9.6 billion.

But I know this: the market place is alive with rumors. Competitors are viciously selling against YRC to customers, warning of a possible fourth-quarter shutdown of what is still the nation's largest trucking company.

Respected trucking analyst David Ross of Baltimore-based Stifel Nicolaus, who has long had the best read on YRC's rather murky financial projections, is warning in a note to investors that unless YRC's terminal and other asset sales "come through big," the company may run aground of its minimum liquidity covenants in November. That basically means YRC runs out of cash.

YRC's lenders have been more than patient. Even now, they have allowed YRC to waive the minimum $100 million liquidity covenant for August and will allow YRC to keep all (up to $50 million) of its proceeds from ongoing asset sales. This will allow further "wiggle room" as YRC decides if it can sell more assets (its Holland and New Penn regional LTL units might fetch a suitor but industry overcapacity means any sales price will be depressed).

The company's 33,000 active Teamsters currently are voting on another wage concession and pension freeze package. Together, this might save the company as much as $900 million over the next 12 months.

Look for the Teamsters to approve the wage cut, but not by the overwhelming 82 percent majority that the early 10 percent wage cut passed. This will be closer, but will still pass, according to sources within the union. Results will be announced around Aug. 6. But even with those concessions, YRC is far from being "out of the woods" as its financial noose continues to tighten.