YRC Worldwide: Jimmy Hoffa would be proud
Today's Financial News - Posted July 10, 2009
Will the unions ever learn? YRC Worldwide (NYSE:YRCW) investors are riding a nauseating roller coaster this week as management and the union debate a pension obligation. If a deal is not reached, the trucking company’s next stop may be at a bankruptcy court.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): When are the detrimental effects of a nasty recession too much for a company that has done everything right too much to overcome? That is the question YRC Worldwide (NYSE:YRCW) investors are asking these days.
Just a couple of months ago, when the media was abuzz with sightings of economic “green shoots,” the trucking company’s investors were riding a rocket to the top, celebrating as a strong management team helped shares cross the $2 level, then $3, then $5, even $6.
But now that the nation’s trucking demand is far from revved up, investors are realizing YRC’s troubles are not over yet. During the last week, they were forced to endure the pain of seeing their shares drop all the way to a new 52-week low of a paltry $0.89.
The latest pain comes from my arch nemesis… union labor.
In YRC’s case, the Teamsters are maintaining their infamous negotiating might and bargaining themselves right out of a job.
With revenues plunging and fuel costs remaining stubbornly high, the last thing any trucking company needs to do is worry about expensive pension contributions. In YRC’s case, it is forced to pay for employees that never even worked for the company thanks to a regional pooled pension plan. (That’s unions for you).
I will give the Teamsters credit, however. Earlier this year the union agreed to a ten percent pay cut for its employees in exchange for a 15% stake in the company. Unfortunately, that stake is now worth a fifth of what it was in January.
Did they learn?
After getting hit with that punch, it is easy to see why the union showed up at the bargaining table this month with less willingness to compromise.
Earlier this week, the two sides of the contract were so far apart on the company’s plans to defer pension payments that one analyst boldly stated he believes a bankruptcy filing is all but certain.
The less-than-optimistic announcement sent shares plunging by 45% in just two days.
Then came yesterday’s announcement that the Teamsters had reached a tentative agreement (which remains undisclosed). The news sent shares soaring by triple-digit proportions.
Today, the jubilation is dwindling as shares are down by about 10% on the day’s lows.
With any luck, YRC shareholders will become re-familiarized with the bulls next week when union members learn the details of the agreement and prepare to take a vote.
If the deal is signed, YRC will get a major reprieve. It will likely be able to push back major pension obligations for over a year, saving the company half a billion dollars of desperately needed cash.
Investors should look at the company as a high-risk, speculative play, but the rewards could be phenomenal for folks willing to hold onto shares for six months to a year.
The threat of bankruptcy is still out there, but appears far smaller today than it did just 72 hours ago. As the situation improves, so will share price.
Next Article: CardioNet: A heartbreaking drop
4 Responses to “YRC Worldwide: Jimmy Hoffa would be proud”
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July 10th, 2009 at 9:45 am
It is clear you have no idea what your talking about. The Teamsters are protecting their members and this company in this round of bargaining. The teamsters agreed to open the contract to help this company stay alive. to hear t\you tell it they opened the contract to attempt to strong arm the company. If you would pull your head out of you back side every thing would not smell so bad to you.
July 11th, 2009 at 8:54 am
If this isn’t as a anti union statement as I have read sounds like to me you listen to Sean Hannity too much.The union did not get us into this mess Mr. Zollars did ,do your research The union didn’t go out and get into nearly two billion dollars worth of debt,Mr.Zollars did,again do your research…The only thing Mr.Zollars didn’t plan for,was the continuing recession.As far as the pension liability goes it started with UPS getting out of the CSPF with the blessing of you know who,MR.Zollars..Mr Zollars is taking the ship down by himself and you come on here and say it is the union you are out of touch with reality..
July 13th, 2009 at 5:06 am
mr snyder you dont really know what you are talking about like every one ellse this is your opinion its funny no matter what management dose thay can do no worng these compeys wher built by business men that knew how to run a company not a college idiot
July 13th, 2009 at 5:39 am
Mr. Snuder;
You are wrong in saying that the Teamsters are the problem. Starting with the contract that we agreed to in April of 2008, where we gave up a considerable amount of work rules, to the give back that we approved too in Jan. 2009. The Teamsters’ have opened up to all talks with YRC in hopes of avoiding any kind of bankruptcy. We just learned of the tentative agreement between YRC and the Teamsters on the 10th of July, so how can we be playing hardball and not trying to due all that we can, if we don’t even know what we will have to vote on.