NEW YORK—The chief executive of the country's largest trucking company by revenue said Thursday he expects a proposed union wage reduction and other planned cost savings to be "more than enough to ride out the economic downturn."
In an interview with the Associated Press, YRC Worldwide Inc. President and Chief Executive Bill Zollars said the $225 million to $250 million savings from a planned wage reduction, combined with another $200 million in savings from an ongoing integration of YRC's Yellow and Roadway units, and expected concessions by nonunion employees, will be enough to keep the company from running out of cash or violating debt obligations.
YRC, a less-than-truckload carrier, said on Wednesday it had reached a tentative deal with Teamsters leaders to cut wages of the company's 40,000 union workers by 10 percent. The company has about 58,000 employees, and still plans to lay off thousands of those workers as part of the plan to save cash.
Zollars said the company is currently working out the details of concessions to be made by nonunion workers.
Less-than-truckload carriers such as YRC usually fill their trucks with freight from a variety of sources and might re-sort and redistribute it at a company terminal along their route.
Zollars applauded the union leadership for "stepping up and taking a progressive view on what needs to be done."
"I think that will help us a lot going forward," he said.
He played down the suggestion that the move would sour shippers on the company.
"From a customer standpoint, we are looking at a lower cost base, better service with the integration, and a definite improvement in our competitive position. This is all good news," he said.
The 10 percent wage cut, if approved by workers this month, will go into effect on Jan. 1 and last until the union contract expires in 2012.
Zollars held to his view that the environment for the less-than-truckload industry, suffering from waning demand and deteriorating pricing, should remain tough through 2009.
Earlier Thursday, a JPMorgan analyst upgraded shares of YRC, saying the deal to slash union workers' wages significantly reduces the company's risk of violating debt obligations or running out of cash.
Analyst Thomas R. Wadewitz raised his rating on the stock to "Neutral" from "Underweight," adding that the stock no longer warrants the lower rating, given its sharp slide since September.
However, Wadewitz said that significant challenges still remain for the company, citing the weak less-than-truckload market and "intense competitive pressures."
Wadewitz also predicts the trucker's fourth-quarter should be "ugly," suggesting results might fall below his estimate of a 70 cents-per-share loss. Analysts polled by Thomson Reuters project a quarterly loss of 46 cents per share.
In morning trading shares of YRC Worldwide Inc. climbed 94 cents, or 19.4 percent, to $5.78.