YRCW sells 65 percent share of Shanghai Jiayu Logistics Co. Ltd.
March 09, 2012
With a close eye on regaining North American market share, less-than-truckload (LTL) transportation services provider YRC Worldwide (YRCW) said yesterday it has sold its interest in Shanghai Jiayu Logistics Co. Ltd. to its 35 percent joint venture partner.
YRCW officials said that this deal is subject to Chinese regulatory approval and is expected to close in the second quarter of this year and added that financial terms were not disclosed.
Shanghai Jiayu Logistics Co. Ltd. is one of the largest truckload and LTL providers in China. When YRCW acquired its stake in the company in August 2008, the company had more than 30,000 customers, 1,800 employees, 200 locations and a network of more than 3,000 vehicles.
“The selling of our interest in Jiayu continues to be a part of our overall strategy to have a laser-like focus on North American LTL operations,” said James Welch, YRCW CEO, in an interview with LM. “It is what we do best, and if you look at the investment into China, this was a company that was not really helping what we do in North America out. It was a standalone provider in China and was not doing what it needed to do.”
From a financial standpoint, Welch added that Jiayu was not operating very well and was not providing any benefit in terms of the clarity of what YRCW is trying to do in North America.
This transaction is the most recent example of YRCW getting back to basics and focusing on its core LTL services. In December, it announced it “sold a significant portion of its assets” of its truckload subsidiary, Glen Moore, to Celadon Trucking Services Inc., a subsidiary of truckload carrier Celadon Inc.
When this deal was announced, Welch said that this deal was done to get the company focused on straight LTL operations, explaining that he felt YRCW had been really distracted with assets outside of its core LTL expertise.
And in its recent fourth quarter earnings release YRCW said it hired Chicago-based NRC Realty & Capital Advisors LLC to coordinate the auction of 62 of its surplus properties resulting from our network integration activities, which have substantial holding cost, maintenance and real estate taxes.
“Those  properties cost the company about $4 million per year to carry them, and we are trying to get rid of them through the auction process,” said Welch. “We are trying to get rid of anything that is a distraction outside of what we do best, which is North American LTL business.”
Welch who re-joined YRCW last year as CEO, began his career in 1978 as a sales rep for Yellow Transportation, now known as YRC Freight. In 2000, Welch was named Yellow’s president and CEO, a position he held until 2007.
When he took the helm as CEO and back in 2007 when he left, he said it was clear that there were “too many distractions,” in that no matter how hard the company tried to diversify into 3PL and logistics, warehousing or abroad in China, more than 95 percent of the company’s revenues and profits always came from freight-related operations.
“It was more of a decision to not try to be something we are not, as evidenced by changing the name on our building to YRC Freight,” he said. “We are just trying to bring clarity to our customers, employees, shareholders, and lenders to show that we are in the freight business and have been for a long time.”
The other global logistics operation still remaining in the YRCW portfolio is China-based freight forwarder JHJ Forwarding, which has been in the fold since 2005 as part of a China-based joint venture, with YRC and Jin Jiang Investment each having 50 percent equity in the company.
When asked if YRCW is actively shopping JHJ, Welch would not directly confirm. But he did note than anything not directly relating to North American LTL operations is being dealt with and considered.
In terms of how things are going overall at YRC following its recent fourth quarter earnings announcement, Welch said he is pleased with the progress the company is making but not satisfied at all.
“I like what we are doing and how we are doing it,” he said. “We are very focused on service and quality and are focused on the YRC Freight change of operations, which is scheduled to be implemented in April. We are working hard on revitalizing our sales efforts. I am little frustrated in that we are making progress but it is just not quite showing up in our numbers yet, but I am confident that as 2012 unfolds we will see better operating numbers from the companies that make up YRCW.”
YRCW is meeting with its Teamsters members for a change of operations hearing later this month. Welch said he is confident that the changes will be approved. He explained that the changes will put more service focus on shipments with a 500-to-3,500 mile length of haul.
When Yellow and Roadway were initially integrated in 2009, Welch said the network was not designed as effectively or as efficiently as it needed to be.
“We are reducing our handling and speeding up transit times and speeding up the two-to-five day service lane business,” said Welch.
The change of operations hearing with the Teamsters was originally scheduled for March 1, but the Teamsters for a Democratic Union (TDU) said that the delay stemmed from YRC management implementing part of the change in operations prematurely, saying that YRC maintains that Columbus Local 413 Teamsters are dragging their feet, and began to reroute freight around Columbus to the Copley (Local 24) terminal. TDU explained that this led to the Teamsters Freight Division cancelling the March 1 hearing and also noted that Local 413 is expected to lose 121 jobs as part of the change of operations plan.
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