Summary
YRC Worldwide, the nation's largest trucking company by revenue, issued a press release saying it has reached a tentative agreement with the Teamsters union over more concessions made by its 55,000 rank-and-file Teamsters. Exact details are not known, and were not disclosed. They are likely to include an additional 5 percent wage cut in addition to the 10 percent wage giveback the union agreed to back in April.
Analysis
Fighting financial wars on several fronts, beleaguered U.S. trucking giant YRC Worldwide says it has reached a tentative agreement with the Teamsters union regarding more concessions by rank-and-file workers aimed at keeping the $7 billion LTL company afloat.
Exact details were not released. It is believed the Teamsters agreed to an additional 5 percent wage giveback to go along with the 10 percent cut agreed to in April. That earlier cut was estimated to save the company as much as $250 million annual. So an additional 5 percent shave might save the company $100 to $125 million.
"The press release says nothing new," wrote David G. Ross, a respected analyst who tracks YRC Worldwide for Stifel Nicolaus, Baltimore.
Ross has been on top of this company. He estimates that YRC National (the old Roadway and Yellow networks) has suffered year-over-year freight volume tonnage losses of up to 40 percent. Its regional carriers (the only Holland and New Penn companies) are off more than 20 percent.
There might also be concessions regarding pension payments and perhaps health care co-pay costs. Historically, Teamsters covered by the National Master Freight Agreement have never been asked for a co-pay on their health care costs. Whether that remains a non-starter in these talks is unknown.
YRC has lost nearly $2 billion in its last nine operating quarters. It is widely expected to post a loss when second-quarter results are announced this month. It has stopped making cash payments to the Teamsters' Central States pension plan, saving the company an estimated $83 milion during the second quarter.
All this is necessary for YRC to remain within its loan covenants. Lenders have been extraordinarily helpful to YRC in this regard. It is almost as if its lenders want no part in liquidating some 15,000 power units and perhaps more than 22,000 trailers in a soft market for used truck equipment.
Clearly, there are many moving parts to this saga. Besides the Teamsters negotiations over both wages and pensions, YRC is actively in discussions with its lenders.
It has retained financial advisors, including Tenex Capital Management, Alvarez and Marsal and Rothschild Inc. to assist in what the company calls "a comprehensive strategy plan to address its capital structure and liquidity needs."
An official from Tenex Capital Management was recently quoted by the Associated Press as saying any liquidation or bankruptcy talk regarding YRC was premature. This official is quoted anonymously by the AP as saying a Chapter 11 or 7 bankruptcy will not be the route taken in streamlining YRC.
In this regard, Rothschild has begun preliminary discussions with "several significant holders" of YRC's debt securities, the company said in a press release to reporters.
"We can't control the economic environment, but we certainly can and are controlling our response to it," YRC Chairman, President and CEO Bill Zollars said in the press release.
YRC's customer base has remained surprisingly loyal. For YRC's workers' sake, let's hope they are getting more hard figures on YRC's financial condition than the rest of us are.
