YRC CEO: U.S. slowdown may be spreading
CHICAGO (Reuters) - YRC Worldwide Inc (YRCW.O), the world's largest trucking company, is seeing signs that slowing U.S. economic growth is beginning to spread to the global economy, the company's top executive said on Wednesday.
"It (the slowing U.S. economy) is really comprehensive right now," Chief Executive Bill Zollars said at the Reuters Manufacturing Summit in Chicago. "We have also seen something recently that we have not seen in a long, long time, and that's the port activity has begun to slow a little bit."
"This thing is becoming global," he added. "That was our worry right from the beginning that this would not be limited to the U.S.," he said.
Trucking companies are on the front line of the U.S. economy, the first to do well in an upturn, but also the first to suffer when things go bad.
Zollars said that a common theory until recently that much of the rest of the global economy had been "decoupled" from the U.S. economy and would be less susceptible to slowdowns in the U.S., the world's largest economy, was exaggerated.
"I'm sure that it's ... been overstated quite a bit," he said.
Zollars also said at this point concerns over a U.S. recession should outweigh the risk of rising inflation, adding that the U.S. Federal Reserve "has no choice but to cut rates further."
Overland Park, Kansas-based YRC Worldwide is a less-than-truckload (LTL) company, which consolidates smaller loads into a single truck. YRC Worldwide has operations in about 80 countries, including China, and about 66,000 employees.
In early February, YRC Worldwide said it was closing down 27 service centers and shedding around 1,100 jobs in its struggling regional LTL business. Zollars said that apart from some "fine tuning," the majority of the company's restructuring was over, and it would start to see the impact of cost savings in the second quarter.
YRC Worldwide recently agreed to a new five-year contract with the Teamsters union, which will become effective once the old contract expires on March 31.
"We got a great deal of flexibility in this contract and also an opportunity to move into markets we have not been in the past, like the truckload market," Zollars said.
Truckload companies haul goods long distances.
Under the current contract, YRC Worldwide has had to rely on four to six people involved in moving a trailer around a dock, but now could pay a utility employee an extra $1 per hour to perform several tasks, Zollars said.
"It allows you to move more quickly, so it speeds up the velocity of the network and reduces the number of hand-offs so you have a lower cost option," he said.
(For summit blog: summitnotebook.reuters.com/)
(Reporting by Nick Carey; editing by Jeffrey Benkoe)