In a matter of months, William D. Zollars is expected to vacate the chairman’s office at YRC Worldwide, leaving his successor to radically restructure the trucking enterprise. That successor will have to work with the Teamsters union to revive a company that’s about half the size it was four years ago in terms of revenue, with more than $2.2 billion in losses since 2007.
|Rank-and-file Teamsters employees at YRC Worldwide’s six trucking units must approve that plan first. Ballots were mailed Oct. 7 and will be counted Oct. 28 and 29. Analysts say the comprehensive restructuring would save YRC Worldwide as much $350 million a year, and without it the company could run out of cash by the third quarter of 2011.
YRC Worldwide’s board says it will seek candidates from inside and outside the organization. The foremost internal candidate is likely to be Michael J. Smid, who as chief operations officer already runs YRC Worldwide’s national and regional less-than-truckload networks. Smid’s history with the nation’s largest trucking operator stretches back to 1985.
As president of YRC North American Transportation, Smid oversaw the difficult integration of Yellow Transportation and Roadway and was named president of the unified national carrier, YRC, in 2009. He previously ran Roadway for YRC, and held several key operations jobs at Yellow Transportation.
Some analysts and observers believe it might be best for the company to keep Smid on top of operations and look for an outsider to bring a different perspective to the CEO’s role at YRC Worldwide. And not necessarily a perspective based on years in trucking.
“I would love to see them hire a major logistician, a shipper, somebody who’s been in the business for a long time and understands the yin and the yang of it,” said Wayne Bourne, president of Bourne Management Group, a consultant to shippers and carriers and a former logistics executive. “If they hired someone who speaks the language of the customer, who knows what the shipper wants and needs, that would be very intriguing.”
That would mesh with one of YRC’s major goals — drawing customers who left the company in 2009 back to the fold, and convincing current customers to give them more freight. Even with the savings promised by the tentative Teamsters agreement, YRC needs to win back customers to return to profitability, and that means emphasizing quality over quantity when it comes to LTL freight and pricing.
YRC’s directors also could look to other modes. In 1996, following two years of losses and the resignation of then-president and CEO George Powell III, YRC predecessor Yellow Corp. turned to A. Maurice Myers, president of America West Airlines and former head of Aloha Airlines.
Saying “we can’t save our way to prosperity,” Myers paid down debt, reduced expenses, sold a failing subsidiary and led Yellow back into the black. He also brought Zollars from Ryder Integrated Logistics and named him president of Yellow Freight System.
There are also potential candidates in the trucking field. One might be Douglas G. Duncan, the former Roadway executive widely considered the architect of FedEx Freight, who retired as president and CEO of that company in February. Duncan, however, left FedEx as its trucking unit suffered losses blamed in part on a price war with YRC, and it’s questionable whether the Teamsters would accept a CEO from an archrival nonunion player — even if Duncan has no non-compete clause in his retirement agreement.
Former Yellow Transportation President and CEO James L. Welch, who led the company from 2000 to 2007, just announced the sale of his current company, expedited carrier Dynamex, for $210 million to Greenbriar Equity Group. Welch joined Dynamex as president and CEO in 2008. “James Welch could be a great candidate,” said Satish Jindel, president of SJ Consulting Group. “But if I were at Dynamex, I wouldn’t want him to leave.”
YRC Worldwide lost a potential internal candidate in April, when then-President Timothy A. Wicks returned to his former employer, UnitedHealthcare, to become president of Ingenix Outsourcing. Wicks spent less than two years at YRC Worldwide, starting as executive vice president of finance and becoming CFO and president in less than a year. He was widely credited with engineering a series of key agreements with YRC’s lenders.
What YRC Worldwide needs, Jindel said, “is someone who understands how LTL works and how shippers make decisions.”
FedEx’s plan to merge its expedited and long-haul LTL networks will put additional pressure on YRC and ABF Freight System, he said.
“This is their last chance. Whoever they pick will either help the company make it or kill it.”
Contact William B. Cassidy at email@example.com.