Updated:
5/25/2009 2:30:00 AM
YRC’s Performance Improving as Firm Cuts Costs, Zollars Says
By Rip Watson, Senior Reporter
This story appears in the May 25 print edition of Transport Topics.
NEW YORK — YRC Worldwide Inc. has received relief from lenders who waived an earnings target for the second quarter, and company head William Zollars said the less-than-truckload carrier’s performance is improving because of several cost-cutting moves, including potential pension-payment relief from the Teamsters union.
The company acknowledged reports that the unionized less-than-truckload carrier also is considering an application for $1 billion in aid from the federal Troubled Assets Relief Program to defray pension costs that currently are a cash drain.
“We are in the process of finishing negotiations with pension funds,” said Zollars, chief executive officer. He declined to give a date when he expected those talks would conclude. YRC hopes to save cash by replacing cash pension payments, now ranging from $34 million to $45 million a month, with pledging of real estate collateral.
Zollars, who spoke May 19 at the Wolfe Research Global Transportation Conference here, said the company was making progress in recovering business diverted when its Roadway and Yellow Transportation LTL units were integrated two months ago. The company has regained three to four percentage points of the 11% business reduction attributed to concerns about the integration process, he said.
“We would expect, as we move through the second quarter, more and more business will return,” Zollars said. He said the company’s operating loss was “60-ish” million dollars in April.
Zollars estimated that YRC’s annual costs would be cut by $665 million because of a 10% Teamsters union wage cut approved in January, savings from the integration, nonunion compensation reductions and other steps. Based on full-year 2008 results, that would represent a savings of about eight percentage points in the operating ratio for LTL services that account for 93% of YRC’s revenue.
Zollars said volume trends during the second quarter remain similar to those in March, and pricing is fairly consistent. The cost reductions have created a lower break-even point for freight, changing YRC’s view of some business that didn’t look attractive in the past.
“You will see us be more competitive,” he said.
He also said that the company’s pace of using cash actually is declining over time and that the company’s cash flow traditionally is stronger in the second half of the year.
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