Truckers Forum

Man! I know the trucking industry has been tough, especially for owner operators, but wow even Yellow (who also owns Roadway) is having a hard time.

The trucking industry had a rough 2009. The recession has cut the amount of goods being shipped and shippers have been more cost-conscious, cutting revenues to trucking firms. The less-than-truckload part of the market has seen added competition from UPS and FedEx’s moves into the LTL market during the late 00's, making it even harder for trucking firms to have much pricing power.

At the same time, new diesel engine standards, higher diesel fuel prices and other added costs, like the 5% raise in tolls on the New York Thruway that went into effect on Sunday, have added to the variable costs of operating trucks. The result has been losses for many firms, forcing some out of business and causing others to redo their financial structure in order to reduce their interest payments and keep out of bankruptcy.

Overland Park, KS-based YRC Worldwide, the parent company of Yellow and Roadway trucks and the largest trucking firm in the US, staved off bankruptcy in late December 2009. YRC had a $19 million interest payment due on New Years Eve which they were unlikely to be able to pay; they were counting on a debt-for-equity swap to be approved, where YRC bondholders would trade their bonds for a 94% stake in YRC. Without the swap, the company was looking at bankruptcy, but if the swap was approved, they could avoid paying the interest on the bonds and have an easier time paying

The Teamsters, who represent YRC drivers, were a key player in getting the bondholders to approve the swap. The Teamsters protested in front of banks and hedge funds thought to be holdouts and requested the Securities and Exchange Commission and the New York attorney-general’s office to see if credit-default swaps were improperly causing bondholders to be hoping for bankruptcy. A bankruptcy would have voided Teamster contracts and possibly sent part of YRC’s business to non-unionized firms, so the Teamsters were very intent on doing what they could to keep YRC out of bankruptcy.

As of the end of business on December 29th, YRC had only 81% approval of a key bond class; 95% was needed to finalize the debt-for-equity swap. A one day extension had only improved the number from 80% to 81%. Bondholders finally came on board on December 30th, only hours before YRC would have defaulted on their debt. YRC has yet to get final approval from its stockholders, who will only have 6% of the reorganized company.

Two firms, Arrow Trucking and Carlen Transportation, went out of business in late December. Maine-based Carlen Transport was closed rather smoothly, as workers were notified after their Christmas party of the company’s closing; trucks made their final deliveries without incident.

Conversely, Tulsa-based Arrow was a case study in how not to gracefully wind down a trucking business, as workers were not notified that Arrow was shutting down on December 23rd. Truck drivers often found out the bad news when their fuel cards stopped working. Drivers were eventually told to take their trucks to the nearest dealer for their tractor, where they would get either $200 or a bus fare home.
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Some Arrow drivers didn’t have enough fuel to get their trucks to the nearest Freightliner or Navistar dealer and others were left scrambling to get home for Christmas. The trucking community pitched in to get Arrow drivers back home for Christmas, with the owner-operator trade group setting up a ride-sharing board for stranded Arrow truckers and truckers willing to give them a ride; Schneider Transport, one of the larger trucking firms, offered Arrow truckers a ride towards home as well.

The Federal Motor Carrier Safety Administration has ordered Arrow to move the trucks into secure locations and make sure any trucks containing hazardous materials is attended. In addition, a class-action suit has been filed, claiming Arrow violated the Worker Adjustment and Retraining Act for not giving workers 60 days notice. Arrow has yet to file for bankruptcy, complicating the process of winding the company down.

2010 is unlikely to see any further major closures, since most of the other large trucking firms, such as Con-Way, Landstar and JB Hunt, are in solid fiscal shape. However, the pressures on the trucking industry might force many owner-operators or smaller firms out of the business, as requirements for new equipment might be more than some thinly-capitalized businesses to handle.