- Credits
- 540
according to published reports.....KK
Could the company restructure in Chapter 11 and ultimately re-emerge a viable competitor?
We do not believe so. First of all, no LTL carrier has ever successfully come out of Chapter 11. In fact, most Chapter 11 filings are unsuccessful, especially when customers have other options. Even Consolidated Freightways filed Chapter 11 in September 2002 but essentially liquidated immediately.
The reason is that the LTL business is a network business where density is very important to cover fixed costs. When a company loses freight, the operating leverage works against them, and it becomes increasingly difficult to make any money. YRC is no different. If it weren't for the $400+mm in real estate sales and termination of its participation in union pension plans (and the banks' contortionist
flexibility with fees and covenants), the company would have run out of cash much earlier this year.
The company does not have the lowest price or the best service in the industry. It also operates mainly in the long-haul LTL market, which
has become increasingly competitive (10 years ago, there were 4 main competitors; now, there are at least 8 complete options) and is in secular decline (move to more regional shipments, TL linehaul substitution, TL consolidation, etc).
Could the company restructure in Chapter 11 and ultimately re-emerge a viable competitor?
We do not believe so. First of all, no LTL carrier has ever successfully come out of Chapter 11. In fact, most Chapter 11 filings are unsuccessful, especially when customers have other options. Even Consolidated Freightways filed Chapter 11 in September 2002 but essentially liquidated immediately.
The reason is that the LTL business is a network business where density is very important to cover fixed costs. When a company loses freight, the operating leverage works against them, and it becomes increasingly difficult to make any money. YRC is no different. If it weren't for the $400+mm in real estate sales and termination of its participation in union pension plans (and the banks' contortionist
flexibility with fees and covenants), the company would have run out of cash much earlier this year.
The company does not have the lowest price or the best service in the industry. It also operates mainly in the long-haul LTL market, which
has become increasingly competitive (10 years ago, there were 4 main competitors; now, there are at least 8 complete options) and is in secular decline (move to more regional shipments, TL linehaul substitution, TL consolidation, etc).