New Penn | freight/or,s
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ABF Freight System's Latest Change of Operations: Harbinger of YRC Unit Acquisition?
April 29, 2009
PrintEmail to a FriendAnalysis by: John Schulz
Analysis of: ABF Consolidation: Change of Operations
Published at: tdu.org
Implications
ABF Freight System is planning to close Teamsters' road board operations in six locales. It says it is doing this because of declining freight volumes and to consolidate operations. The proposal means a loss of 127 Teamsters jobs.
Analysis
Arkansas Best Corp.'s largest unit, ABF Freight System, is requesting a change of operations from the Teamsters union that will mean a loss of 127 jobs through consolidation at six terminals. The move is a reaction to declining freight volumes at the company.
The proposed change of operations is expected to be approved by the union at a meeting in Las Vegas on May 13.
That much is known. What isn't known is what is going on behind the scenes in the executive suites at ABF and, perhaps, at YRC Worldwide, the nation's largest LTL carrier.
With analysts clamoring that there could be as much as 10 to 15 percent overcapacity in the LTL industry, some moves have to be made. ABF's first-quarter operating results were dismal--the parent company lost $18.2 million in the first quarter compared with $8.2 million profit in the year-ago first quarter as truckers cope with lingering effects of the recession.
What is startling about ABF's results was the whopping 23.3 percent decline in tonnage. That caused ABF's operating ratio to balloon to a whopping 108.3 in the first quarter, compared with a 97.3 OR in the year-ago first quarter.
Clearly, this latest nominal change of operations is not going to turn around those dismal results.
So, what would?
There are rampant rumors within the trucking industry that ABF may be preparing a bid for YRC's troubled regional freight unit, the former USF Corp. companies. This would includes former top-flight regional companies Holland and New Penn, both Teamster-covered carriers which once were highly profitable enterprises under USF that have fallen into money-losing units under the YRC aegis.
Nobody knows exactly what the asking price would be. But one thing is certain: it will be nowhere near the $1.2 billion that YRC paid for USF Corp. back in 2005. That purchase, along with the $1.1 billion purchase of Roadway Corp. in 2003, has saddled YRC with too much debt and is one of the reasons YRC is struggling for survival.
Would an ABF purchase of the old USF units help YRC? It would at least inject some badly needed cash into that parent company.
Would it help ABF? Depending on the purchase price, yes. ABF is still mainly a long-haul carrier. Although it recently has made forays into the regional LTL markets through its "RPM" initiatives, it is still a fledgling operation. Purchase of Holland and New Penn would give ABF a strong presence in the regional LTL market, the fastest-growing sector of the LTL industry.
Presuming a purchase price of, say, $150 million, the purchase of the YRC regional units might make sense to ABF. It would give them instant access to more regional LTL customers, a greater presence in that market and might, just might, spark a profit turnaround.
Why? Holland and New Penn once were solidly profitable, often turning in quarterly ORs in the low 80s (or, in New Penn's case, the high 70s) as recently as six or seven years ago. Holland is tied to the fate of the U.S. auto industry, which could be due for a rebound. New Penn's woes are less clear, but once it was the dominant and most profitable LTL carrier in the Northeast. My solution to New Penn's woes would be for ABF to go back and find some of the old freight salesmen who worked for the company when founder Ed Arnold was running the company.
Like a good baseball trade, this might be a good swap for both companies. YRC needs the cash. ABF needs the regional capacity. Nothing else has worked to spark these two companies out of their financial doldrums. I say it's time to roll the dice.
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.Request a Consultation with John Schulz
Report a Concern Similar Analyses
The Latest YRC Survival Tactic: Defrring Teamsters' Pension Payments
India is still living in villages
Capacity rationalization still needed in trucking industry
April 29, 2009
PrintEmail to a FriendAnalysis by: John Schulz
Analysis of: ABF Consolidation: Change of Operations
Published at: tdu.org
Implications
ABF Freight System is planning to close Teamsters' road board operations in six locales. It says it is doing this because of declining freight volumes and to consolidate operations. The proposal means a loss of 127 Teamsters jobs.
Analysis
Arkansas Best Corp.'s largest unit, ABF Freight System, is requesting a change of operations from the Teamsters union that will mean a loss of 127 jobs through consolidation at six terminals. The move is a reaction to declining freight volumes at the company.
The proposed change of operations is expected to be approved by the union at a meeting in Las Vegas on May 13.
That much is known. What isn't known is what is going on behind the scenes in the executive suites at ABF and, perhaps, at YRC Worldwide, the nation's largest LTL carrier.
With analysts clamoring that there could be as much as 10 to 15 percent overcapacity in the LTL industry, some moves have to be made. ABF's first-quarter operating results were dismal--the parent company lost $18.2 million in the first quarter compared with $8.2 million profit in the year-ago first quarter as truckers cope with lingering effects of the recession.
What is startling about ABF's results was the whopping 23.3 percent decline in tonnage. That caused ABF's operating ratio to balloon to a whopping 108.3 in the first quarter, compared with a 97.3 OR in the year-ago first quarter.
Clearly, this latest nominal change of operations is not going to turn around those dismal results.
So, what would?
There are rampant rumors within the trucking industry that ABF may be preparing a bid for YRC's troubled regional freight unit, the former USF Corp. companies. This would includes former top-flight regional companies Holland and New Penn, both Teamster-covered carriers which once were highly profitable enterprises under USF that have fallen into money-losing units under the YRC aegis.
Nobody knows exactly what the asking price would be. But one thing is certain: it will be nowhere near the $1.2 billion that YRC paid for USF Corp. back in 2005. That purchase, along with the $1.1 billion purchase of Roadway Corp. in 2003, has saddled YRC with too much debt and is one of the reasons YRC is struggling for survival.
Would an ABF purchase of the old USF units help YRC? It would at least inject some badly needed cash into that parent company.
Would it help ABF? Depending on the purchase price, yes. ABF is still mainly a long-haul carrier. Although it recently has made forays into the regional LTL markets through its "RPM" initiatives, it is still a fledgling operation. Purchase of Holland and New Penn would give ABF a strong presence in the regional LTL market, the fastest-growing sector of the LTL industry.
Presuming a purchase price of, say, $150 million, the purchase of the YRC regional units might make sense to ABF. It would give them instant access to more regional LTL customers, a greater presence in that market and might, just might, spark a profit turnaround.
Why? Holland and New Penn once were solidly profitable, often turning in quarterly ORs in the low 80s (or, in New Penn's case, the high 70s) as recently as six or seven years ago. Holland is tied to the fate of the U.S. auto industry, which could be due for a rebound. New Penn's woes are less clear, but once it was the dominant and most profitable LTL carrier in the Northeast. My solution to New Penn's woes would be for ABF to go back and find some of the old freight salesmen who worked for the company when founder Ed Arnold was running the company.
Like a good baseball trade, this might be a good swap for both companies. YRC needs the cash. ABF needs the regional capacity. Nothing else has worked to spark these two companies out of their financial doldrums. I say it's time to roll the dice.
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.Request a Consultation with John Schulz
Report a Concern Similar Analyses
The Latest YRC Survival Tactic: Defrring Teamsters' Pension Payments
India is still living in villages
Capacity rationalization still needed in trucking industry
N
NP Driver1
Guest
Great post trucker999! It is vital to keep all our brothers informed of developing news. Are you a New Penn employee? If so please update your location.
Camp Hill are you fellows getting enough of the Cub Cadet lawn tractors? Worked a little OB last week and noticed the NP door filling up quickly with the mowers. Still waiting on the Pride Mobility account to come back. A little communication problem occurred last week between our "HMES" OS&D and NP's. I load city(Memphis) and had a del that I didn't recognize the street name. So instead of sending the driver on a wild goose chase, I asked our OS&D clerk to contact NP origin term and get a correct address. NP's first comment to our clerk was "Wilson has no trouble delivering this customer". So, we googled the street and it was in Nashville. Billing error by the customer I guess.
Boilerpeddle
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I hope this is not a pervasive attitude and that it was just a bad day or a joke.
If the Midwest ever picks up we have a great potential to give you guys a lot of freight.
It is the inbound bill count that gets our guys back to work