Welch Returns to YRC to Succeed Zollars as CEO

James Welch, installed last week as CEO of financially challenged YRC Worldwide, freely admits that he carefully considered his “homecoming” for several weeks before accepting the task of turning around a company that lost more than $2 billion between 2008 and 2010.

Welch, who succeeded retiring William Zollars, inherits a company whose results have improved a bit lately. Although YRC had a second-quarter loss, operating profits returned after a 14-quarter drought that began in 2007.

That was the year Welch left YRC, after nearly 29 years.

The less-than-truckload company continues to post quarterly losses due to interest and restructuring costs, and its debt burden remains at $1.29 billion as of June 30, although it reported positive net earnings on second-quarter operations. YRC also announced it has completed a financial restructuring that makes lenders the majority owners of the corporation.

In an interview with Transport Topics during his first day on the job, Welch said his initial plan after leaving YRC was to fish and play golf.

That didn’t last long.

“After six months, I started getting the yips,” Welch said. “I said, ‘I’ve got a lot of gas left in the tank.’ ”

Welch, 57, did financial consulting, then became interim CEO of JHT Holdings, which transports new trucks. While he was at JHT, the company restructured through bankruptcy.

Welch left JHT in 2008, moving to package carrier Dynamex, which was sold to TransForce Inc. earlier this year.

Welch said his transition back to YRC began two months ago with a call from a corporate recruiter.

“One thing led to another — more phone calls and discussions,” he said. “I came to peace with myself to go back home. I was concerned and disappointed and worried about the health of the company and employees that I knew and loved.”

Welch’s return wasn’t settled until about a week before it was announced, he said.

His career at the former Yellow Transportation began in 1978 in the sales department and culminated in his appointment as president in 2000.

When he left in 2007, YRC termed the move a retirement, as the management of Yellow and Roadway Express was being consolidated into YRC National.

He acknowledges the departure wasn’t smooth.

“I left four years ago because I wasn’t in agreement with the direction the company was headed,” Welch said, citing YRC’s ambitious acquisition path in 2005-2006, which included the $1.5 billion purchase of US Freightways, a regional trucker and logistics operator.

“We were at the height of the freight cycle, and the economy was starting to wane and valuations [of acquisitions] were too high,” he said.

When Welch left, YRC was on its way to posting nearly $10 billion in annual revenue after generating $276.6 million in 2006 net income.

In the first half of 2007, YRC’s national transportation business, composed of Yellow Transportation and Roadway, generated $3.31 billion in revenue and $125 million of operating income.

Results sagged in the recession, and by the first half of 2011, the national unit had shrunk by more than half, with revenue of $1.56 billion and operating losses of $40.7 million. The logistics unit was cut back, shedding such tasks as managing an iron mine in Peru. YRC sold a majority stake in that business to private equity firm Austin Ventures.

That move effectively returned YRC to its LTL roots. LTL generated 98% of second-quarter revenue, with the balance coming from truckload activities.

“It’s kind of ironic in several ways,” Welch said. “We’re going back to be more of a trucking company, now that MIQ [the logistics unit] is gone. I am going to really focus on the operating companies to do what they do best — LTL trucking.”

Asked how he’ll accomplish that, Welch said, “To be totally honest, my goal is to do a lot of listening in the next two or three weeks, then I’ll go out into the field. I want to be in front of as many customers as possible. You’ll see me start to make some reshaping moves. I want to be sure the sales force is capable of competing.”

Welch noted several changes in the LTL business since he left, including a stronger broker presence.

Brokers “try to commoditize LTL carriers,” he said, meaning that they focus on rates and view carriers as interchangeable.

“That is something we have to work on — showing that we bring value to the marketplace,” he said.

The intervening period also changed him personally, Welch recounted, citing his time at JHT.

“I had never been at a financially distressed company,” he said. “Yellow was solid throughout my 29 years there.”

He wouldn’t say whether YRC can ever repeat the results achieved before 2007 or when that could happen.

“I don’t want to overpromise or undercommit,” he said. “We still have a large network. We still have good flexibility. We have to work hard on lane density and equipment utilization.”