Analyst predicts YRC bankruptcy

An industry analyst is raising strong doubts about whether trucking company YRC Worldwide Inc. will be able to avoid bankruptcy, even with the latest labor contract concessions from its 35,000 Teamsters employees.

''Bankruptcy, in our view, is not imminent, but we do believe it is becoming increasingly likely,'' wrote transportation analyst David Ross of Baltimore-based Stifel Nicolaus. Other industry analysts have also said YRC could file for bankruptcy.

In the report issued Wednesday, Ross downgraded YRC shares from ''hold'' to ''sell,'' saying company stock is basically worthless. It is likely that the first quarter of 2010 — typically the industry's weakest time of the year — will be the company's last, he said.

Company employees now own ''35 percent of zero,'' Ross said in an interview.

Shares of YRC on Wednesday fell 25 cents to $2.05. Shares are down 28.6 percent since Jan. 1 and are down 89.5 percent from a year ago.

YRC executives have been saying that they are cutting costs and making other changes to improve company finances. Chief Executive Officer Bill Zollars called the Teamsters vote on the latest concessions ''game changing.''

The company issued a statement Wednesday in response to the analyst report:

''YRC Worldwide continues to report significant progress on its comprehensive plan to manage through the economic recession. Through the ongoing support of its key stakeholders including its lender group, union and non-union employees and pension funds, the company is moving forward with its strategic plans to restore financial strength and position its operating companies for future success.

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If You're Squeamish on the LTL Sector, Don't Read This

Implications

The current economic downturn has been brutal on all the trucking industry, but especially the LTL sector. A $34.5 billion sector that has been flat for more than 10 years, it is being punished even further by trends toward consolidation by third-party logistics operators and truckload carriers seeking to expand their bases. Is this, indeed, the beginning of the end for LTL?

Analysis

This is an exceptionally strong, well-written and well-researched story by a former colleague, John Gallagher, now with the Journal of Commerce.

In it, Gallagher examines the current downward trend in profit and volumes in the beleaguered LTL sector. After one finishes reading this, one realizes the LTL sector has more problems than merely overcapacity, sluggish rates and company-specific problems due to YRC Worldwide's heavy debt load.

What may indeed be happening is a secular shift away from the higher-cost, unionized operations of the LTL industry and toward the more nimble, lower-cost, non-union carriers of the $320 billion TL sector. And away from asset-based carriers altogether and toward third-party logistics companies, who by and large want nothing to do with the unionized parts of the trucking industry.

Some examples: leading 3PL C.H. Robinson, an $8.7 billion operation, is increasingly "swiping" loads away from the LTL sector and instead building and consolidating them toward much cheaper and more efficient truckload moves.

Truckload carriers themselves, with plenty of idle capacity right now, increasingly are moving "downstream" to build 5,000- and 10,000-pound shipments, hoping to consolidate with other small loads and hopefully able to turn a profit while doing all this for, say, $1.45 a mile. Full Story..........