Crisis Management and YRC

I’ve written for Over the Road Magazine now for 15+ years. This is the first time I’ve ever mentioned a carrier by name. The reason I haven’t is, I don’t wish to get openly involved in carrier bashing and/or propping. It’s safe now to comment on YRC (often known as Yellow) as this company, which has been around since 1924, has declared bankruptcy after years of financial struggles and growing debt. They will be wrapping up services and assets… soon they will be no more.

I sat down with a client who was working at YRC and went over their finances and options. They had worked at Yellow for many, many years. The difficulty comes when evaluating the options at a later stage in life and halfway through the life cycle of a highway tractor. A well-qualified driver will almost always land on their feet when it comes to a job. The truck, however, in some circumstances, can be a difficult fit. In this case, the client will be okay, but not all situations end up that way. Matching a truck, a driver and a carrier is sometimes more difficult than assumed. The Operators at YRC may be struggling to place some of their units now set free. A year ago, those assets could have been sold at a premium price. Today they are well below average. It’s amazing how fast markets can change. Independent Operators ride the waves of asset valuations.

An Independent Operator is a description of two types of operators: Lease Operators and Owner Operators. Owner Operators are those who get paid a percentage of the freight while Lease Operators are paid cents per mile (loaded or empty). YRC operators were Lease Operators. Remember, this title has nothing to do with their financing situation; it has to do with their business model for gaining revenue. Lease Operators are all about miles… miles, miles & miles! Owner Operators are about revenue and time, which is not always about miles. YRC Operators were always looking for miles.

I hardly have outside information about YRC (never mind inside information) so my personal opinion is very tainted with hearsay and conjecture. The only thing I know for sure about the management and the union is… things couldn’t be worked out for a mutual benefit.

It’s sort of like one of your good “couple friends” going through a divorce. Even though you may be closer to one party than the other, you know it is not ONLY one party’s fault. It’s sad but somewhat inevitable if conflicts and crises are never really dealt with.

The drivers will find jobs; most equipment will find a place to work. The freight will be divided up between carriers and the assets will be sold off to satisfy the debt (to the best it can). It will be amazing how fast we will forget.

Transportation of freight is an industry highly dependent on people and their performance. Freight is accepted and rejected based primarily on reputation. Reputation can be built over several decades but lost in only a few minutes.

I was in a small family run restaurant a while ago. It was known for its fresh food and value pricing. I came into the entrance just as the “owner of the operation” was openly chewing out the waitress in front of all the customers. It was not pretty. I thought it was extreme and I felt sorry for the girl… until her reply came… it was just as brutal. As she went on, it suddenly became apparent that the conflict was between a daughter and a father. The entire crisis spun into a very personal family one. All I wanted to do was get the heck out of dodge.

When internal conflict within a business spill out into the street, customers just want to get the heck out of dodge. It’s a recipe for quick and terminal bankruptcy.

Crisis Management is all about dealing with issues long before they become terminal. SUN TZU in the book “The Art of War” said, “…the best war ever fought is the one never waged”. Solve the problem before it turns into a war.

With 20/20 hindsight, perched softly in my recliner chair, with no skin in the game whatsoever, I’d say someone didn’t solve the real problems at YRC. I hope someday, the same won’t be said about me.

About the Author:
Robert D. Scheper is a leading Accountant and Consultant exclusively serving the Lease/Owner operator industry in Canada. His first book in the Making Your Miles Count series “taxes, taxes, taxes” was released in 2007. His second book “Choosing a Trucking company” is the most in-depth analysis of the independent operator industry today. He has a Master’s degree (MBA) in financial management and has been serving the industry since he and his wife came off the road in 1993. His dedication, commitment and strong opinions can be read and heard in many articles and seminars.

You can find him at www.makingyourmilescount.com or 1-877-987-9787.