YRC lives! Now what?
It survived a brush with bankruptcy. But for YRC
Worldwide Inc., the hard part may be just beginning.
Against the odds, the less-than-truckload (LTL) carrier accomplished much in the latter part of 2009. It
persuaded its bondholders to swap $530 million in debt
for 1 million in newly issued equity shares and in so
doing, convinced its lenders to free up more than $100
million in credit YRC needed to survive. It made an ally
of Teamster president James Hoffa, who helped YRC
engineer a financial resolution of its troubles to preserve 35,000 Teamster jobs at the carrier.
But while it was focused on getting support from
lenders and labor it needed just to stay afloat, YRC neglected the one constituency that mattered most and the
one that will keep it alive: shippers.
The uncertainty surrounding YRC’s protracted battle
to survive unnerved its customers to the point where
they diverted freight to its rivals. While the typical YRC
shipper wouldn’t abandon the carrier entirely, it would
shift enough of its freight to make a difference.
Executives at two of YRC’s rivals, both of whom
requested anonymity for themselves and their companies, said their firms took share from YRC as shippers
grew more uncertain about its prospects. But in a
reflection of the poor shape the LTL industry is in, one
of the rival executives said the gains from YRC were
neutralized by volume losses as the carrier’s overall
business contracted.
Satish Jindel, president of SJ Consulting, a
Pittsburgh-based transportation consultancy, said
YRC Chairman William D. Zollars and his management team now must focus all their attention on shippers, and they have little time to waste. “They need to
act fast,” Jindel said. Zollars declined a request for
comment.
It’s not that YRC isn’t doing whatever it takes—the
carrier has gone so far as to offer $50-off coupons for
each transaction that generates at least $150 in freight
charges. The promotion is good for up to 10 transactions, meaning shippers can save up to $500.
Such promotions may become the rule rather than
the exception as the LTL market struggles with soft
shipping volumes and significant overcapacity. Jindel
estimates the segment has about 35 percent excess
capacity, or double the market share of YRC, the largest
LTL carrier by sales.
One of the rival executives said that “until capacity is
reduced, we expect continued challenged pricing.”
What will it take to restore equilibrium? “Carriers cease
doing business or the economy jumps, the latter of
which is not likely,” the executive replied. ;
—M.S.
go figure …
164,439
The number of employees at the seven U.S. Class I railroads at the end of 2008. In 1980, the year the rail
industry was deregulated, Class I rails employed about
458,000.
SOURCE: ASSOCIATION OF AMERICAN RAILROADS
When it comes to cargo security, air and ocean transportation are probably where you’ve focused your efforts. But if
you have any involvement with the storage and distribution
of chemicals, warns the U.S. Department of Homeland
Security (DHS), then you need to add those activities to
your list of security concerns—right now.
That’s because the DHS this year plans to ramp up enforcement of the Chemical Facility Anti-Terrorism Standards, or
CFATS, a rule that establishes risk-based performance standards for chemical facility security. The standards were published in late 2007 but haven’t been enforced until 2010.
CFATS applies to any facility that manufactures, uses, stores,
or distributes certain chemicals at or above specified quantities. The rule requires all facilities that handle chemicals to
complete an online questionnaire about the operation. Once
they submit the completed form, facilities receive an automated response advising them whether or not their chemicals are regulated. Chemicals that fall under the regulations
are those that DHS has determined present significant risk
from theft, diversion, sabotage, or other security issues, says
Laurie Boulden, senior compliance officer at DHS.
Facilities that are regulated must conduct a security vulnerability assessment, Boulden says. Once DHS has
reviewed the assessment, a facility may be required to prepare a “Site Security Plan” demonstrating that it is able to
meet certain risk-based performance standards.
“DHS is expressly forbidden from requiring any particular
measure, so it is up to each individual facility to decide,
based on its own processes, operations, business models,
and plans, how it wants to meet the standards,” Boulden
says. “Each site is basically writing its own regulation by
which it wants to be held accountable.”
Penalties for non-compliance are stiff: up to $25,000 per
day and/or orders to cease operations. The regulation is com-
plicated, and DHS has made detailed information available
online at www.dhs.gov/chemicalsecurity. DHS will also pro-
vide informational presentations, on-site “compliance assis-
tance” visits, and compliance training upon request. ;
—Toby Gooley
DHS to enforce security rules for
chemical storage
