YRC Freight unveils network restructuring plan

Mark B. Solomon
DC Velocity
March 13, 2013

YRC Freight, the long-haul unit of less-than-truckload carrier YRC Worldwide Inc., on March 11 unveiled a long-awaited network restructuring that seeks to close three breakbulk terminals and consolidate 29 smaller, "end-of-line" terminals used as freight pickup and final delivery points. However, it may be some time before the plan is implemented.

The Overland Park, Kan.-based carrier, which employs between 20,000 and 25,000 members of the Teamsters union, initially requested meetings on March 20 with leaders of union locals to discuss the proposed changes. However, the dissident group Teamsters for a Democratic Union (TDU) said today that the international leadership in Washington told all locals not to schedule any meetings with YRC through the end of April because there are "substantive and procedure issues" with the proposal.

YRC asked for the March 20 meetings in a Feb. 11 letter sent to Teamsters General President James P. Hoffa and other members of the union hierarchy.

Under the National Master Freight Agreement, the compact that currently governs labor relations between the Teamsters and what's left of the unionized trucking business, a company has the right to implement a "change of operations." Management must meet with the union to discuss the proposal, and labor has substantial input in how the change is executed. However, the Teamsters don't have much control over the company's overall strategy.

The proposed restructuring would eliminate breakbulk terminals in Cincinnati, St. Louis, and Memphis. It would also consolidate end-of-line terminals in San Jose, Calif.; Youngstown and Mansfield, Ohio; and Daytona Beach, Fla., among other cities, into YRC's terminal network. Ironically, on that list is Fort Smith, Ark., home of YRC's archrival, ABF Freight System Inc.

YRC Freight plans to open a small "relay" driver facility in Staunton, Va., staffed by 26 drivers. Relay drivers take over a load and drive between eight and 10 hours before handing that load to another driver. After a required break, the initial driver would then take over the next truck heading back to his or her hometown.

The restructuring proposal would lead to the loss of 760 dock, shop, office, and cartage jobs, and an additional 452 over-the-road driver positions at the various affected terminal locations. At the same time, 343 over-the-road driver jobs would be created, along with 639 cartage positions. All told, the restructuring would result in a net loss of 230 jobs.

In the Feb. 11 letter, YRC Freight said the proposal is designed to improve line-haul density, reduce unproductive "empty" miles, cut fixed administrative costs such as building and leasing expenses, and make the company's service more cost-effective.

A breakbulk facility acts as an intermediate sorting point for interregional freight. Freight from the various end-of-line terminals is sent to a regional breakbulk terminal to be combined into trailers, which the carrier then routes to end-of-line terminals. For example, freight destined for Texas from a terminal in Binghamton, N.Y., might go to a breakbulk terminal in Pittsburgh, where it would be combined with Texas-bound freight from other Eastern cities.

Charles W. Clowdis Jr., a longtime trucking executive and now managing director, transportation advisory services for the consulting firm IHS Global Insight, said the proposal should reduce the frequency of freight "touches" between origin and destination, a problem that plagued Yellow Transportation Inc., the LTL carrier whose 2003 merger with Roadway Express Inc. created what is now known as YRC Freight.

"Every time a carrier handles, or 'fingerprints,' a shipment, it adds labor costs," Clowdis said. In addition, fewer handoffs should, in theory, result in smaller loss and damage claims, he added.

"The basic premise is that fewer handling(s) and fewer small terminal investments translate into more profit," Clowdis said.

Freight-claims ratios, which historically were a big problem at YRC Freight, have declined for seven straight months on a year-over-year basis through the end of January, Jeff Rogers, YRC Freight's president, said in an interview with DC Velocity last month. Without disclosing specifics, Rogers said the unit's freight-claims ratio is at its lowest level in years.

The network proposal is Rogers' latest move to wring efficiencies and profitability out of YRC Freight. That unit still accounts for the bulk of the parent's revenue, and its troubles nearly drove the entire company into bankruptcy at the end of 2009. Rogers was named head of YRC Freight in September 2011 after three years piloting Holland, a regional carrier and YRC subsidiary.

YRC Freight posted fourth-quarter operating income of $21.1 million, its second consecutive quarter of operating gains and a nearly $48 million improvement over the 2011 period. Its fourth-quarter operating ratio—the ratio of revenues to expenses and a key gauge of a carrier's efficiency—improved 600 basis points year-over-year to 97.3, the unit's best fourth-quarter operating ratio in six years. The ratio meant YRC Freight generated $97.30 in expenses in the quarter for every $100 in revenues.

In a sign that YRC Freight has made progress in shedding unprofitable freight, the unit's revenue per hundredweight—a central measure of tonnage profitability—rose 3.2 percent both in the fourth quarter and for the entire year, even though tonnage and shipment count were down in the same periods.

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