Four months after James Welch rejoined YRC Worldwide as CEO, the scope of his plans for the ailing trucking giant is becoming clearer. Welch and his new management team aim to chop a decade’s worth of fat away from the company’s trucking core and flip its management style on its head.
The goal is to pare YRC Worldwide back to its bare bones and shift authority to the executives in charge of the less-than-truckload operating companies, YRC, Holland, New Penn and Reddaway and sharpen the focus of a $4.3 billion enterprise that grew into one of the country’s largest, but perhaps most troubled, trucking operation.
“In the recent past, this company tended to avoid terminologies like freight and customers, instead using terms like logistics, transportation, consumers, and I’ve made it very clear to our employees that yes, indeed, we are in the freight business,” Welch told investment analysts in a Nov. 4 earnings conference call. “We look forward to returning our focus to the basics of delivering consistently reliable LTL services to our customers with a re-energized and fully engaged work force.”
That certainly suggests that Welch believes that nationwide LTL carrier YRC at least has not been delivering consistently reliable service, and that he and new YRC President Jeff Rogers see room to improve performance of the day-to-day basics of delivering freight.
“The first thing we’re going to do is (figure out) how we can move freight better without handling it so much, because that will help us in all kinds of areas, improving service as well as reducing claims, improving customer satisfaction,” Rogers said. “Right now we’re handling too much freight too many times.”
Sidebar: Measuring LTL Capacity
Rogers streamlined last month by eliminating several management positions and consolidating the carrier’s operating territories into two regions.
Despite progress over the past year, a $500 million financial restructuring and new leadership, YRC Worldwide faces a long road back to profitability. The company reported a $120 million net loss in the third quarter, including $96 million in one-time restructuring costs. Higher freight volume and LTL rates pushed total revenue up 12.3 percent year-over-year to nearly $1.3 billion.
Nationwide LTL trucker YRC slipped back into the red with a $14.3 million operating loss after reporting a $10.6 million profit in the second quarter. The carrier’s revenue rose 11.5 percent to $841.6 million. The regional group continued to rebuild its bottom line, pushing its operating profit up 25 percent from a year earlier to $12.4 million. The regional carriers reported $404.8 million in revenue.
YRC Worldwide gained from rising LTL rates in the quarter, increasing its revenue per hundredweight, or yield, 7.5 percent year-over-year, compared with a 6 percent increase in the second quarter and a 1.8 percent increase in the first quarter. The regional carriers boosted yield 8.2 percent in the third quarter, 6.5 percent in the second and 1.8 percent in the first quarter.
Those increases include fuel surcharge revenue as well as increased revenue from higher rates, but they follow the overall trend in the LTL industry. Including fuel surcharges, Old Dominion Freight Line boosted its yield 13.7 percent in the third quarter, while Con-way Freight’s yield rose 12 percent year-over-year.
Sidebar: LTL Pricing Heads Up
YRC Worldwide benefited from strong market discipline as LTL carriers focus on rebuilding bottom lines shattered during the recession. Asked by an analyst whether YRC Worldwide would consider breaking ranks to regain market share, Welch replied, “I don’t think we ever want to lead with price at all.”
In fact, he’s in no hurry to return YRC Worldwide to its pre-recession glory, when the company counted nearly $10 billion in revenue and commanded almost a quarter of the LTL freight market. “Do I envision us being a $10 billion company again? No. But I definitely think that we have a role to play in this industry,” Welch said. “We’re still a large company when you look at the shipments we handle per day.”
YRC is handling more freight. Total daily shipments rose for the third straight quarter, climbing 5.5 percent year over year. The regional carriers increased shipments per day 3.6 percent from a year earlier. That gives YRC some business to work with as it aims for greater goals, like profits.
“Our larger customers want us to be in business, and they would like to give us more business,” Welch said. However, he wants more profitable freight from large shippers. “If you go back and look over the last couple of years, when the company maybe was in its darkest hours, the mix of freight that we took on, either by just the situation of the economy or the competitive pressure, you know it’s not where we want it, and we’re going to have to change that over time,” Welch said.
“One of our big opportunities is to adjust our mix,” Rogers said. “We know that.”