Laid-off cubicle dwellers look to the open road

Schools start to see a new type of student: White collar and older

Just over a year ago, Patrick Greene was working for one of the nation's oldest investment banks. Now he's driving a truck.

Greene was a purchasing manager who arranged travel for Bear Stearns executives. He was laid off in July 2008, a few months after JPMorgan Chase & Co. took over. He tried to find work at similar companies, but with no luck. So, after about 40 resumes came to dead ends, Greene decided to learn to drive an 18-wheeler at Edison, N.J.-based Smith & Solomon trucking school.

"It's something I always thought I would like, and just never got to do," Greene said. Despite trucking's long hours and being on the road away from his wife and children for weeks at a time, Greene, 49, liked the idea of a career change after years behind a desk. Full Story........

ATA Seeks Nominations For Mike Russell "Good stuff" Trucking Image Award

The American Trucking Associations today announced that it is seeking nominations for the third annual Mike Russell “Good stuff” Trucking Image Award. The award honors those that creatively generate positive awareness of the trucking industry.

“As an industry, it is important that we highlight trucking’s essentiality,” said ATA President and CEO Bill Graves. “This award provides a chance to recognize those that have gone above and beyond to promote trucking’s role as the backbone of the American economy.”

Submissions will be evaluated by an impartial panel of judges based on creativity, execution and reach/impact. All submissions must be submitted to the image campaign by Sept. 14, 2009. Winners will be announced during ATA’s annual Management Conference & Exhibition Oct. 4-7 in Las Vegas, Nev.

“This is the third year for this award and I am more impressed with each submission,” said ATA's Communication and Image Policy Committee Chairman Mike Kelley with YRCW. “The trucking industry is fortunate to have such dedicated and resourceful members and I look forward to this year's nominations.”

For a Mike Russell “Good stuff” Trucking Image Award nomination form, click here.

The award is named in honor of the late Mike Russell, a trucking industry supporter and media official who helped develop the “Good stuff. Trucks Bring It.” campaign as Vice President of Public Affairs for the American Trucking Associations. Russell’s efforts to improve the image of the trucking industry inspired this award.

If YRC fails, what happens to US truck sector?

The fortunes of a particular corner of the U.S. trucking industry in the next year are as tied to whether one company, YRC Worldwide Inc, survives as they are to a recovery in the recession-bound U.S. economy.

If YRC fails it could provide competitors with just the reduction in industry capacity they need to jack up pricing for the first time since late 2006.

While that would be good news for the less-than-truckload (LTL) market -- which refers to truckers who consolidate smaller loads into a single truck -- it will hurt customers already facing the pinch in a down economy.

YRC, based in Overland Park, Kansas, nearly quadrupled its revenue from $2.6 billion in 2002 to a peak of $9.9 billion in 2006 thanks largely to two major acquisitions, and is important because it controls some 20 percent of the LTL market.

"One of two things has to happen: either we have to lose capacity or demand has to come back," said Morgan Keegan analyst Art Hatfield. "The rate at which YRC's business is deteriorating makes it more likely that it will be them to go out of business rather than someone else."

He said a YRC failure "would have a positive effect on the market, as it would help restore the balance between supply and demand. It would also help stop the bleeding on pricing."

LTL shippers account for around 13.6 percent of America's trucking sector, with the rest dominated by the highly fragmented truckload -- or long-haul -- market. Full Story.......

YRC Worldwide, Teamsters trade plans to bolster trucking company

YRC Worldwide Inc. and its union have swapped plans for helping the trucking company generate sufficient short-term cash.

The parties began talks Monday at the International Brotherhood of Teamsters’ headquarters in Washington. A Teamsters negotiating committee is reviewing YRC’s proposal, and negotiations were expected to resume Tuesday, according to an update on the Teamsters’ Web site. The union has said it is reaching out to stakeholders — such as pension funds and lenders — to address the cash issue.

The Overland Park-based trucking company which has about 49,000 employees, has been hit by a drawn-out freight recession, losing $257.4 million in the first quarter. It has integrated subsidiaries, shut down facilities, laid off workers and sold property to try to cut costs and maintain liquidity.

Early this year, Teamsters member agreed to a 10 percent wage cut and suspension of cost-of-living adjustments through 2013 in exchange for a 15 percent stake in the company. YRC also has been negotiating to defer union pension fund payments using company real estate as collateral — a move its lenders allowed — and on June 18 secured an agreement with the largest pension fund to defer $83 million in payments.

Better times ahead for national trucking industry?

A national trucking economist believes the worst might be in the rear-view mirror of the trucking industry.

The American Trucking Associations’ advance seasonally adjusted For-Hire Truck Tonnage Index was up 3.2% in May, the first increase since February. Fort Smith-based ABF Freight System saw its first-quarter tonnage drop 15.7% compared to the first quarter of 2008. Its second-quarter tonnage through mid-May is down 17%, according to company spokesman David Humphrey.

Trucking, according to ATA, serves as a barometer of the U.S. economy, representing nearly 69% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 10.2 billion tons of freight in 2008.



However, May’s increase wasn’t large enough to offset the March through April cumulative reduction of 6.7%, noted the ATA statement. Compared with May 2008, tonnage contracted 11%, which was the best year-over-year result in three months. Despite the improvement from April’s 13.2% plunge, May’s decrease is still historically large.

“I am hopeful that the worst is behind us, but I just don’t see anything on the economic horizon that suggests freight transportation is ready to explode,” ATA Chief Economist Bob Costello said in the statement. “The consumer is still facing too many headwinds, including employment losses, tight credit, rising fuel prices, and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term.”
Costello also noted that he doesn’t expect tonnage to deteriorate much further and that any growth in tonnage over the next few months is likely to be modest.

ATA Chief Economist Bob Costello said the month-to-month improvement was encouraging, but cautioned that tonnage is unlikely to surge anytime soon.

Donald Broughton, a trucking sector analyst with Avondale Partners, was cited in a recent Associated Press report as saying more than 3,000 trucking companies went out of business in 2008, which removed about seven of 100 trucks off the roads. He said about 480 trucking companies went out of business during the first quarter of 2009, which is less than 1% of the industry’s freight-hauling capacity and leaves too much capacity competing for the lackluster demand.

YRC to Apply for Bailout Funds

Amid Pension Pressure, Trucking Company Plans to Request $1 Billion in U.S. Aid

YRC Worldwide Inc., one of the nation's largest trucking companies, will seek $1 billion in federal bailout money to help relieve pension obligations, the chief executive said Thursday.

The move comes as the trucking giant struggles to shore up its finances. The company's ability to weather the recession will have significant implications for the trucking industry and large customers across the country.

Chief Executive William Zollars said the company will seek the money to help cover the cost of its estimated $2 billion pension obligation over the next four years. Under a complicated system that Mr. Zollars labeled unfair, roughly half of YRC's contributions to a multi-employer union pension fund cover the costs of retirees who never worked for the Overland Park, Kan., company.

By applying to the U.S. Treasury for money under the Troubled Asset Relief Program, Mr. Zollars said he hopes to "get the conversation started" with federal authorities about reducing the company's pension obligations. He said YRC will submit an application to the Treasury Department as early as Friday.

Experts say the company's odds of actually getting TARP money appear to be slim. A Treasury spokesman didn't return a call seeking comment.

"My experience dealing with Treasury is that with TARP funds they are relatively narrow in how they view things," said Frank Bonaventure Jr., a lawyer who has represented banking clients seeking these funds. "They have not been very expansive in terms of how it is applied and what industries could get it."

The move comes at a time when YRC is taking steps to cut costs and raise cash. With $1.5 billion in revenue for its most recent quarter, YRC owns at least 20% of the national market share in the less-than-truckload industry, in which trucking companies combine multiple customers' loads into a single truck.

Last month, YRC reported a $415 million first-quarter loss, with a 30% drop in freight tonnage. Some customers fled amid fears about the company's financial health and its ability to smoothly merge its separate Yellow and Roadway brands. YRC has been working on the integration for several months.

The company recently negotiated a 10% wage cut for its 35,000 Teamster employees and requested to put up some of its property as collateral in order to defer three months' worth of payments to its pension plan. It also notified investors that it might violate the terms of its bank covenant, although Mr. Zollars said Thursday that YRC "continues to work closely with our bank group and would expect no issues around the second-quarter covenant."

One potential outcome that the company could seek is for the Pension Benefit Guaranty Corp. to take over financial responsibility for pension payments to retirees who worked not for YRC but for other companies that have since gone out of business and are no longer contributing to the multi-employer plan, according to a person familiar with the situation.

Mr. Zollars declined to comment on YRC's specific strategy in seeking the funds, other than to say the company shouldn't be forced to pay the pension benefits of employees who never worked for YRC.

"We're making really good progress on our financial-recovery plan and we think this is an extra burden we shouldn't have to be carrying," he said, adding that applying for the TARP funds is a "way to get the dialogue started about the pension issue."

As trucking goes, so goes the economy

Looking for signs of economic recovery? Try counting the number of trucks on the road.

Trucks carry almost all the manufactured and retail goods in the country - from refrigerators to lumber, detergents to toys. Many economists gauge how fast assembly lines are running, and how much consumers are buying, by the volume of goods hauled by trucks. But the most recent earnings reports show trucks are not carrying enough yet to indicate recovery is near.

Slow consumer spending and stalled manufacturing activity took its toll on truckers in the first three months of the year. Nearly all major trucking companies reported lower first-quarter revenue and falling profits as the recession continued and shipping demand slid. Many cut back their fleets because of soft demand. Werner Enterprises Inc., for example, said it trimmed an additional 4 percent of its fleet of over 8,000 trucks in the first quarter. Many companies said more cuts will come.

Full Story.......

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..........

YRC Negotiates $351 Million in Sale/Leasebacks

YRC Inc. and USF Reddaway Inc., subsidiaries of YRC Worldwide Inc., continue to shed their ownership in trucking facilities across the country.

The two trucking transportation groups entered into another real estate sales contract with Estes Express Lines to sell and simultaneously lease back more trucking facilities throughout the United States.

The aggregate purchase price for the subject facilities is $32 million and initial annual lease payments would be $2.9 million in total.

The new Estes contracts are in addition to similar deals struck earlier this year for $122 million.

Separately, YRC, USF Holland Inc. and New Penn Motor Express Inc., also each YRC Worldwide subsidiaries agreed to sell and leaseback additional facilities to unidentified investors. The aggregate purchase price is $70 million and initial annual lease payments to be $6.1 million in total.

Both deals include a few facilities that were originally a part of another transaction with a different buyer.

Previously YRC and USF Reddaway also struck a deal to sell and leaseback facilities with NATMI Truck Terminals LLC. That deal was amended so that deals could be struck with the latest buyers. Originally to total $150.4 million, the amended deal will total $127 million, of which $111 million in deals closed in the first quarter of 2009.

The company expects to close on all of the new and remaining deals this quarter.

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....

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?

Shippers sailed rough seas in 2008 economic storm

They carry laptops and toys, cars and coal, but they're not Santa's elves, and they weren't very jolly this holiday season.

It's been a devastating year for the nation's railroads, trucking companies and package shippers - the companies on the "front lines" of the economic recession. Shipments have plunged as retailers pulled back on orders and consumers tied their purse strings tight in preparation for more hard times. Swiftly accelerating oil prices through the first seven months of the year crippled companies even more.

The Dow Jones Transportation Average, which incorporates railroads, shippers, airlines and logistics companies, lost a quarter of its value in 2008 and fell more drastically - by about a third - in the last three months of the year. That compares with a 40 percent decline for the Dow Jones Total Market index and a drop of 39 percent for the Standard & Poor's 500 index in 2008. Full Story......

Roadway to close most of local facility

Tannersville terminal to lose estimated 143 jobsRoadway Express will close most of its Tannersville terminal by March 1, transferring or eliminating an estimated 143 jobs as part of a nationwide consolidation of the trucking company's operations.

The move will affect 55 drivers, 42 transfer dock workers, 25 mechanics plus other employees. Most of those jobs will be moved to other facilities.

Just a few jobs related to pickup and delivery will remain in Tannersville; the exact number is unclear.

"Tannersville will be a much smaller operation than it is today," said Mike Smid, president of YRC North America. YRC owns Roadway Express and Yellow Freight and is combining the companies. According to Smid, integration of the Yellow and Roadway will create the largest trucking operation in North America.

At the Yellow location in Allentown, 19 jobs will be gained, while Roadway in Allentown will lose 37 jobs.

Roadway's Tannersville location has experienced several staff reductions in the last few years. In recent weeks some Tannersville workers have been furloughed because of the season and economics.

Of the Tannersville workers affected "most will have opportunities to follow work to locations that are gaining work," Smid said. Those locations have not yet been determined. First, a change-of-operations hearing must be held with the Teamsters union, which represents the workers. That will happen in January, but the exact date and location has not been determined.

The "change of operations" is a document for the union which states the intentions of a company.

"It's a massive change. Probably one of the biggest I've ever seen," said a business agent who declines to give his name at Local 229 Teamsters in Scranton, the home union for Tannersville Roadway employees. Yellow and Roadway job transfers and work-force reductions are planned across North America.

"YRC is being forced to make changes in an attempt to cut costs. Unfortunately that will have some impact on our members. We will work tirelessly to ensure their contract rights are enforced and their seniority is protected," said Leigh Strope, a spokeswoman for the Teamsters.

Tannersville is one of 450 truck terminals in the United States owned by YRC North America.

Yawning Danger

Trucking companies are unwisely given an 11th hour at the 11th hour

Last week, safety advocates petitioned the federal government to reconsider a recent decision to allow truckers to work longer hours. The new regulations deserve more than reconsideration; they ought to be completely dismissed as a regrettable four-year experiment by the Bush administration.

Truckers used to be limited to driving no more than 10 hours straight, but in 2004, the industry successfully lobbied to have them expanded on an interim basis to 11 hours.

Has the 11th hour made the roads more dangerous? Are 11th-hour drivers more likely to be involved in crashes? Some research suggests no, and that's the evidence sited by the Federal Motor Carrier Safety Administration when it granted the rule change in November. But advocates say the government's analysis relies heavily on one study from the Virginia Tech Transportation Institute that is deeply flawed (depending, for instance, on truckers being videotaped; the presence of a camera onboard likely affected their performance).

The bulk of 35 years of research, the petitioners point out, shows that the performance of long-haul truck drivers diminishes even before the 10-hour limit is reached. And while the number of highway fatalities was down the last two years, it went up the first year the new rules were in place. Recent safety improvements to roads and vehicles as well as lower average highway speeds may be masking the effect of the longer hours.


The trucking industry supports the new rules, but a lot of truckers, including the Teamsters, oppose them. Certainly it's hard to see how forcing drivers of 80,000-pound vehicles to spend an extra hour behind the wheel is as risk-free as the trucking companies claim.

Reversing the rule won't be easy for the incoming administration. But repealing it, along with other questionable regulatory actions taken by the Bush administration during its own 11th hour, ought to be a high priority for President-elect Barack Obama.

Moody's cuts YRC Worldwide's debt rating

Plans by YRC Worldwide to offer to buy back all of its publicly traded debt for an average of less than 50 cents on the dollar prompted Moody's Investors Service on Friday to downgrade the trucking firm's debt ratings.

Moody's took YRC's corporate family rating to "Caa1" from "B1", and cut its probability of default rating to "Ca" from "B1".

The rating outlook is developing, Moody's said.

On Thursday YRC said it would tender to buy back up to $537 million in principal on senior notes issued by it and subsidiary YRC Regional Transportation.

Moody's said the offer amounts to an average of about $475 for every $1,000 in debt.

The ratings service said it "views the tender, which is being offered at a deep discount to par, as a distressed exchange."

If YRC is successful with the tender offer, Moddy's said it will have used nearly all of its bank credit facility, which it will then need to refinance in 2012.

YRC shares fell 13 cents, or 2.4 percent, to close at $5.24 on Friday.