Rolling TARP

William Zollars sent a bit of a bombshell through the trucking industry and the larger world of freight transportation last week when he said his troubled company, YRC Worldwide, would seek $1 billion in government bailout money.

That makes YRC the first company amid the financial wreckage of the transportation world to reach for a government handout, even as companies across the spectrum have reported deteriorating business, expanding losses and sharp cutbacks in their operations.

The questions the bailout application raises are large. And, should U.S. taxpayer funds start heading toward Overland Park, Kan., where YRC is based, the implications reach deep into the trucking industry, across the whole transportation world and, truthfully, to the heart of corporate America. But the odd thing is, amid all the controversy surrounding the bailout bid, it doesn’t look like you count Zollars, YRC’s chairman and CEO, as one of those who believes the less-than-truckload giant actually will get the bailout backing.

Zollars said in disclosing the application last week that his goal is to “get the conversation started” on relieving the company of some $2 billion in obligations it faces in multi-employer pension plans.

In that sense, he’s likely done a public service by calling attention to the dark cloud this recession has sent over the working landscape. Countless companies, including large and well-run transportation businesses, have canceled pension contributions in their moves to curtail spending, adding to the pain that has come with declining value of retirement plan investments.

YRC is a special case, however, because its pension obligations come through Teamsters union plans that cover large groups of trucking companies. Because hundreds of companies have gone out of business, however, YRC is one of the last, and certainly the biggest, contributors to the multiple-employer plans left standing. To Zollars, that’s the “penalty of success” in outlasting unionized rivals, leaving the company paying out pensions for large numbers of retirees who never worked for YRC carriers.

But other companies have dealt with that penalty. With its deep pockets, UPS paid $6.1 billion to extract itself from the multi-employer plans.
In this case, Zollars seems to be living by the maxim of White House Chief of Staff Rahm Emanuel, who has famously noted that no crisis should go wasted.

Certainly, YRC’s pension obligations are huge, even troubling, and it’s no stretch to say they are unfair. But the Troubled Asset Relief Program is a poor vehicle for dealing with the serious pension questions that hang over YRC and the rest of the transportation world.

TARP, in fact, would raise new questions. Would a federal bailout bring the Treasury Department’s warrants for YRC stock? Is it fair to business competitors to subsidize one company? Would subsidies of companies in the United States open the door for subsidies of other transportation companies around the world?

It may be time the conversation about pensions started, as Zollars wants, but the conversation should get away from TARP quickly.

Paul Page is editorial director of The Journal of Commerce. He can be contacted at 202-355-1170, or at ppage@joc.com.

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