UPDATE 4-YRC Worldwide says 3rd quarter weakens, stock down

(Adds quotes from CEO interview, paragraphs two to four)

By Scott Malone

BOSTON, Sept 8 (Reuters) - Saying that the economy continues to deteriorate, YRC Worldwide Inc (YRCW.O), the biggest trucking company in North America, warned on Monday that it expects to post a loss from operations in the third quarter, rather than the profit it had previously forecast.

The company's chief executive attributed the weaker forecast to unexpectedly low levels of shipments to retailers ahead of the key holiday shopping season.

"The peak season is right now and we haven't seen much of a peak," CEO Bill Zollars said in a phone interview. He added that demand is still lagging last year's low levels.

"We thought the economy was going to start getting better and now it looks like it has taken another dip," Zollars said.

YRC shares tumbled about 9 percent, dropping into negative territory for the year, as the projected loss reflected more of a slowdown in its business than Wall Street had foreseen.

"Following a soft July, it appears that August has weakened further and the first week of September has remained weak," J.P. Morgan analyst Thomas Wadewitz wrote in a note to clients. "The magnitude of 3Q downside is surprising."

Trucking companies have been hit by a softening U.S. economy -- which has dampened consumer demand for the goods they transport -- as well as by high oil prices, which have inflated their fuel bills.

Overland Park, Kansas-based YRC said it expects to post a third-quarter net profit because of a 70 cent-per-share one-time gain related to the retirement plans of some nonunion employees. But further weakness in the economy, and the cost of investments in its transport network, should result in a "slight" loss from core operations, it said in a statement.

It also expects to incur 6 to 8 cents per share of reorganization costs related to employee severance.

The company, which specializes in less-than-truckload deliveries, launched a sizable restructuring program at the beginning of the year, cutting more than 1,000 jobs and closing service centers.

YRC Worldwide expects to remain in full compliance with all terms of its credit agreement and to have borrowing capacity in excess of $600 million, the company added.

Analysts, on average, had expected the company to report third-quarter earnings of 38 cents per share, a sharp decline from last year's 70 cents per share in the quarter, according to Reuters Estimates.

YRC shares were down $1.58 at $16.22 on the Nasdaq. They are off 5 percent for the year, at a time when the Dow Jones Transport Average index .DJT is up 6.8 percent. (Additional reporting by Nick Zieminski in New York, editing by Gerald E. McCormick and Maureen Bavdek)