YRC to merge Yellow, Roadway operations
YRC Worldwide said Monday it plans to accelerate the integration of its two largest subsidiaries, less-than-truckload carriers Yellow Transportation and Roadway.
Critics have questioned the Overland Park, Kan., transportation conglomerate’s strategy of operating two parallel national truck networks since acquiring Roadway in 2003 despite achieving some back office streamlining. This year the company began integrating the Yellow and Roadway technology platforms and combining the national and regional sales force serving its largest national customers. It also planned to consolidate another 25 terminals, bringing the number of shared terminals to 100 by the end of this year.
Now YRC has decided to fully align the operations of the two trucking companies as well as integrate its local sales force into one marketing team, while still retaining the two familiar truck brands.
The integration effort will occur in phases through 2009 and is expected to improve annual operating income by more than $200 million, the company said.
By operating one national network, the company said it expects to significantly increase its network density resulting in lower fixed costs and enhanced service performance to its customers.
| Zollars |
“The economic downturn has created the capacity in our networks needed to effectively integrate our operations, while improving service reliability and speed. By offering a comprehensive service portfolio through one unified network, we can more effectively serve our customers and simplify their experience,” Chairman and Chief Executive Bill Zollars said.
YRC also revised its third quarter profit guidance. The company still expects to achieve a net profit based largely on a 70 cent-per- share gain related to the consolidation of several retirement plans for nonunion employees. But the company said it now expects a slight operating loss from its core businesses activities as a result of further weakness in the U.S. economy and previous investment in the integration of the national networks. It also expects to incur reorganization costs of about 6 cents to a 8 cents per share due to employee severance.
“The economy has softened further impacting both volume levels and pricing across our operating companies,” Zollars said. “After a solid second quarter, the third quarter started slowly and has progressively weakened. Our earnings have also been impacted by early investments in combining our national companies. We do not see signs of the economy improving in the near term, but as we merge Yellow and Roadway, we expect operating results to show meaningful improvement.”
For more analysis on the challenges facing YRC Worldwide, see the August American Shipper, pages 54-62. ' Eric Kulisch