"Exciting" Time at Yellow Transportation. Does That Mean Profits, Too?

Implications:  Yellow Transportation is enacting what officials are calling the most important change of operations in the company's history. More than 500 Yellow Teamsters have accepted new dock, driving and new "utility" positions to give the venerable long-haul LTL carrier a bigger footprint into the next-day regional freight market.   "We are changing the unionized freight industry," is the why Teamsters National Freight Director Tyson Johnson phrased it.   The buzzword for the change is "velocity."   While that may be hyperbole, what Yellow is doing is significant as it tries to create a turnaround after two quarters of huge losses.

Analysis:   Will it work? That's what people in the LTL industry are asking themselves regarding Yellow Transportation's huge change of operations, involving more than 500 Teamsters.
  The idea is to create a regional "network within a network," which always has been the bane of the large unionized national carriers. But ABF Freight System already has rolled out its version, called "RPM," and here now comes Yellow.
  The idea is to create a faster-paced regional operation where truck doors are ordered closed at, say, 9 p.m. for delivery in markets the next day or, at worst, second day.
  In other words, what Con-way, Estes Express, NEMF and thousands of other regional carriers have been doing, oh, the past 25 years or so.
  The difference is Yellow is unionized. Traditionally, it's always been more difficult (or, more accurately, illegal under the union contract) to change the jobs of workers at Teamster carriers such as Yellow, Roadway and Holland.
  The creation of the new "utility" worker--who can work the dock one day and drive a truck the next--gives Yellow the flexibility to do such moves. Yellow won this flexibility in the last negotiations with the Teamsters on the new National Master Freight Agreement.
  While legendary Teamsters leader James R. Hoffa might be rolling in his grave -- or, perhaps, rolling in the grandstand at Giants Stadium, or wherever his body lies -- his son, James P. Hoffa, is actually embracing such a move.
  Considering the Teamsters have shrunk from more than 500,000 workers in the freight industry to around 70,000 today, younger Hoffa is to be commended for such a move.
 The question is will it work. In order to make it go, Yellow must have enough freight density to fill these trucks at least 70 percent to make it profitability. Sending out a 10 percent loaded truck is a recipe for disaster in freight.
  Right now, in some markets and in some lanes, Yellow has the customer penetration to make this work. The unanswered question is whether it can do this on an extended basis throughout its network.
  It's a question that only time can answer. But one thing is clear: the non-union competition such as FedEx Freight, Southeastern, Saia and the rest will not be rolling over just because Yellow is now offering a next-day option. They can be expected to compete more than ever on price, which while good news for shippers is generally bad news for the industry's scant profits right now.