Monday, January 9, 2012

YRC Returns to Basics

Upon taking the reins of the troubled trucking company, YRC CEO, Jack Welch, stressed that his guiding principle would be to make the company a pure-play LTL provider. As a testament to this principal, in December, the company sold its TL subsidiary, Glen Moore, to Celadon.

In August, Welch noted he would first focus on YRC’s national LTL division – YRC National - which was formed primarily by Roadway and Yellow Corporation acquisitions several years ago. Never properly integrated and too much waste and duplication within the network, it appears the company is finally going to make the appropriate corrections that should have been made long ago. But first, YRC Worldwide needs the Teamster Union approval. This week the company meets with the union to discuss the redesign of the division’s freight terminal network and the handling of shipments. The union has invested heavily in this company and they will probably agree with most of the needed changes.

Besides right-sizing its LTL network, the need to cut costs elsewhere remains. Questions abound as to what the next subsidiary to be sold off will be. Many question the company’s China holdings, however, the company may want to seriously consider keeping this as the Asian market begins to shift away from one dependent on exports to one that encourages domestic consumption. Instead, the company should first think of consolidating/selling some of its other subsidiaries and outsourcing some of the services that are currently provided by its subsidiaries.

Like the rest of the trucking industry, YRC is facing increasing regulations such as the new HoS and CSA. Added to that is rising oil prices, the company will be facing a difficult 2012 as they right their national LTL network. Will customers stick with the company? Will the company be able to gain new customers? Time will tell. If done correctly, this will be a huge win for a company that has been written off so many times by industry analysts and competitors but so far seems to be able to claw its way back.