Shades of Things to come to the Trucking Industry??

[chefdennis]

So 1st we have gov owned banks, then cars companies, now maybe government owned Trucking..........you know once they take gov money, they are selling their souls to let the gov run the business.......them getting the money from tarp might be slim, but its an opening in the door for another industry to be taken over by the givernment.......

YRC to Apply for Bailout Funds - WSJ.com

MAY 15, 2009

YRC to Apply for Bailout Funds

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

By ALEX ROTH and ROBIN SIDEL

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."

[ebsprintin]

I thought we were already taken over by the government. I tell people that if they want to know what it is like to live in a police state to become a truck driver.

I wonder at what point will the government be in violation of their own anti-trust laws?

eb

[moose]

This is a classic : "let them fold " .



Moose.
MN.

[moose]

I wonder at what point will the government be in violation of their own anti-trust laws?

eb

Ha !
very smart observation .



Moose.

[ATeam]

YRCW (Yellow Roadway) has been struggling and losing for months if not years. They built quite an empire with leveraged assets but got creamed by the credit market crash, stock market crash and recession before the companies they brought together could be consolidated and the hoped-for synergies could be realized.

They recently negotiated a pay cut with the union, closed a large number of terminals and even negotiated with the government and union to pledge property in lieu of contributing cash to the pension funds they are obligated to support. As the company has gutted itself in an effort to survive, and as if recession-driven freight declines were not enough, customers are leaving because they fear the company will fail and strand the freight in shuttered terminals and parked trailers.

YRCW's request for TARP funds is, in my view, not so much an indicator of the shape of things to come -- as in government ownership of the transportation sector -- but a desperation play from a company that is out of options and out of time.

The article you cited says the request is unlikely to be granted. You never know until you know, but even if the request was granted, I think YRCW is about done.

In my Advice for Carrier Executives piece, I suggested putting profits ahead of market share. YRCW stands as a case in point. Executives need to focus not on growth but on maintaining profitability in a receding economy; not on being the biggest but on being the most valued company in their customer's eyes.

[greg334]

One potential outcome that the company could seek is for the Pension Benefit Guaranty Corp.

This is the part that scares me, the only reason they want the loan is to start off loading their pension costs onto the tax payer.

This really may not lead to a "Government Takeover", but a change in direction for the company to be led by the government. The news I heard yesterday was the need to shore up their operating funds with the loan but the other side of the coin is that maybe the Obama Administration won't lend the money to them.

Wasn't there some news in March on how well their stock increased?

YRCW (Yellow Roadway) has been struggling and losing for months if not years. They built quite an empire with leveraged assets but got creamed by the credit market crash, stock market crash and recession before the companies they brought together could be consolidated and the hoped-for synergies could be realized.

Well I think the impact of the loss in freight has more to do with any consolidation and it may be that this will force them to accelerate any consolidation plans.

But with that said, there is a positive point here - If the "Too Big to Fail" actually fails and it is gone, then there will be more work for us because this is one of the companies that actually has depressed the prices by being big and offering deep discounts that where they can adsorb the losses (loss of a few percentage points of profit that is).

I suggested putting profits ahead of market share. YRCW stands as a case in point. Executives need to focus not on growth but on maintaining profitability in a receding economy; not on being the biggest but on being the most valued company in their customer's eyes.

YRC is not an example that can be used, it is like FedEx which has a different marketing scheme that they follow. And as I said this will tank compaines who will do this, they have to be comptetives in a field with 3PL freight and high discounts. Taking their eyes off the ball while trying to provide high value freight is a wrong approach at this moment - don't forget, growth equats profit in the short term too.

[davekc]

This is the part that scares me, the only reason they want the loan is to start off loading their pension costs onto the tax payer.

This really may not lead to a "Government Takeover", but a change in direction for the company to be led by the government. The news I heard yesterday was the need to shore up their operating funds with the loan but the other side of the coin is that maybe the Obama Administration won't lend the money to them.

Wasn't there some news in March on how well their stock increased?



Well I think the impact of the loss in freight has more to do with any consolidation and it may be that this will force them to accelerate any consolidation plans.

But with that said, there is a positive point here - If the "Too Big to Fail" actually fails and it is gone, then there will be more work for us because this is one of the companies that actually has depressed the prices by being big and offering deep discounts that where they can adsorb the losses (loss of a few percentage points of profit that is).



YRC is not an example that can be used, it is like FedEx which has a different marketing scheme that they follow. And as I said this will tank compaines who will do this, they have to be comptetives in a field with 3PL freight and high discounts. Taking their eyes off the ball while trying to provide high value freight is a wrong approach at this moment - don't forget, growth equats profit in the short term too.

I would agree. My feeling is you have to have both. A focus on one sector would be detrimental as there isn't enough freight to support just "high value moves". Most companies whether non asset based or not, still need a level of constant cash flow to operate.