YRC Showing Signs Of Coming Back From The Brink
Trucking conglomerate YRC barely avoided bankruptcy in 2009. Now it is showing signs of stabilizing its finances and even potentially becoming slightly profitable in 2010.
YRC is one of the largest trucking companies in the United States. It built up a very large market share over the years, but then took an absolute beating through inefficient operations and a loss of business in the Great Recession. Bankruptcy was a few days away when it was able to negotiate a surprising $470 million plus debt for equity swap with creditors who must have realized they would be squashed in the bankruptcy court.
Many predicted that YRC would not survive even with the swap. I was one of those people. Despite the predictions, the company has staggered forward to stability. It has done this in the typical corporate manner. It has slashed costs and liquidated assets to raise cash. The company is also lobbying with Congress to address its multi-employer pension program mess.
Let’s start with the hard numbers. The company didn’t lose any money in the last financial quarter. It didn’t make a profit either, but being flat is fairly notable in the trucking industry these days. The company has seen shipping orders picked up while at the same time cutting hundreds of millions in costs related primarily to employee cost, to wit, the company is laying off a lot of employees. It is also hoping to liquidate real estate holdings to the tune of $50 million or so by the end of the year.
YRC may be looking up on a quarterly basis, but it still has vast problems. One is the multi-employer pension program. This fund is general fund that all trucking companies above a certain size contribute to. The idea was to cut cost by leveraging the size of the companies and employee count. The exact opposite has happened. So many companies have failed that the burden has become difficult for surviving entities. YRC has reported 40 percent of the money it pays into the fund goes to individuals that have never worked for it. Ultimately, it is lobbying Congress for redress.
So, will YRC make it? It is difficult to say. You can only layoff so many people before it impacts the service provided to customers. In this market, however, you can expect to see YRC trim its staff to the bones as it struggles to have a long-term future.