A few weeks ago headlines were abound with news of General Motors and Chrysler slashing the size of its dealership network, but a little known company called YRC Worldwide, swallowing any sense of pride and asking the federal government for financial support, could prove to be the most enduring news of all.
It could be the biggest development since the collapse of Lehman, which drove global financial markets into a tailspin.
What is YRC and why should we care? YRC is the US’s largest trucking company; formally called Yellow Corp (although it paints its trucks orange) whose fleet covers highways across America. The reason why you should care is that YRC is considered one of the best managed companies in the US - if not the world. When troubled companies seek out top management talent, where do they turn? GE? No. They go to YRC. The turnaround at Waste Management a number of years back was successfully launched by former trucking executive Maury Myers. Corporate America is littered with YRC talent.
If highly respected CEO Bill Zollars’ cannot manage his company through this downturn, it is highly unlikely many others will either. YRC Worldwide is seeking $1 billion in bailout money from the Troubled Asset Relief Program (TARP) to help cover retirement obligations. The company has $2 billion in retirement costs it has to fund over the next four years.
The request essentially confirms that the current US pension structure of working for 30 years and then paying retirement and health-care benefits for almost equally as long does not work - a complete miss match for when work is completed to when employees get paid. But unlike the auto industry, where such pension and health-care funding shortfalls were viewed popularly as the result of decades of poor management
decisions, this cannot be said of YRC.
By the way, these concerns are not isolated to a non-household-name like YRC, but also companies like AT&T and GE. Further, virtually every city and state in the country is suffering from the same affliction. California Treasurer Bill Lockyer has asked Tim Geithner to provide assistance under the TARP, warning of a hit to public services and infrastructure if relief is not soon provided.
With problems so pervasive you would think Americans would begin to change their tune and start supporting some form of government intervention to help find a solution to this issue, such as the government performing a thorough analysis on what can realistically be expected to be paid out by corporations, cities and states. Accordingly, this should be followed by an adjustment to these contracts.
However, there seems to be no such will on the part of the American people. Following the YRC announcement, editorials galore exploded saying this was another corrupt, poorly run company that is justly receiving its comeuppance. Response to these op-eds supported government staying out of the situation.
The call for federal help is a clear sign of how bad the US economy is doing. YRC represents everything that is good in a free capitalist system, aspiring to: excellent management, well-trained employees, a passion and desire to be the best they can be, and a continual drive to become a more efficient company. Also, morally, it is one of the most upstanding and ethical companies in the country. If YRC cannot make it, few will be able to. This is why the request by this little known company might be more systemic than many currently believe.
