Name change only the start of changes coming at Yellow Corp., subsidiaries

It’s becoming apparent that the name change at Yellow Corp., the holding company formerly known as YRC Worldwide, is the least of the changes occurring at the companies controlling 10% of the less-than-truckload (LTL) market.

There are operational changes occurring at networks run by long-haul YRC Freight as well as regional subsidiaries New Penn (East), Holland (Central States) and Reddaway (West) and HNRY, its third-party logistics unit. The goal is to coordinate shipments better, and reduce transit times, Yellow CEO Darren Hawkins confirmed to LM.

But first the name change. Yellow adopted the YRC Worldwide moniker in 2006. As then-CEO Bill Zollars said at the time, “Simply put, the breadth and depth of the enterprise is greater than the name Yellow Roadway conveys. We now operate in over 70 countries around the world and our services have expanded to encompass logistics as well as global, national and regional transportation.”

That was then. Today is different, Hawkins said. Through attrition, sales, and other dispersals, Yellow today is a North American transportation company flush with a $700 million cash infusion under the Coronavirus Aid, Relief and Economic Security (CARES) Act. That allowed Yellow to buy about 300 new tractors and 950 trailers in the coming quarters.

“YRC Worldwide has not had global pursuits in a decade,” Hawkins said in a phone interview. “YRC Worldwide is not representative of our true mission, which is North American LTL freight.”

Turns out Yellow was not an automatic choice for the new branding. Hawkins disclosed the company performed customer research with several alternatives.

“From name recognition, awareness and reputation, Yellow fared well,” he said. “It’s one of the three primary colors, after all. It just made sense to do it. It’s synonymous with North American freight transportation.”

Along with 333 terminals that comprise that North American freight network, changes are coming.

Yellow is embarking on an ambitious network optimization project. Hawkins views the project as a long-term project to transform the four companies into one “super regional LTL carrier,” able to provide one-to-three-day service in its regional lanes and transcontinental service by long-haul YRC Freight.

And unlike other LTL carriers which have tried this transformation, Hawkins said Yellow is in no rush. Among other things that the $700 million federal infusion buys, besides new equipment, is time.

“We’re in the early innings of a nine-inning game,” Hawkins explained. “We’re in the second or third inning. A lot of planning has been done. But as you do this in markets with physical freight, it’s a process you have to work through. I’m very pleased with how we’re doing.”

Yellow’s network optimization comprises six facets—network design and facilities, linehaul planning, routing and interchange, city operations, dock and yard operations and visibility and status.

The immediate goal, Hawkins said, is to improve efficiencies and cost reductions through terminal cohabitation and consolidation. Shippers, he said, should notice little difference outside of gradually improved transit times lane by lane.

“This isn’t a new idea,” Hawkins explained. “It’s one that has been present for some time.”

In fact, the terminal redesign was one of the key components in the 2019 contract talks signed off on by the Teamsters union, which represents the majority of Yellow’s 30,000 employees.

The problem Yellow faced was that it had two brands—Holland in the Upper Midwest and long-haul Yellow Freight—competing for the same type of freight.

“The 2019 labor agreement, with the change of operations that followed, allows us to go across brands as we need to,” Hawkins said. “We won’t have two brands operating in one geography. Enterprise transportation allows servicing that customer with one brand and gives that customer access to the entire Yellow network. It just takes connectors.”

With nearly $5 billion in revenue last year and $700 million in government loans (in exchange for roughly 30% of stock), Yellow has the size to be a significant force in the $46 billion LTL sector. Yellow’s cash and cash equivalents in the third quarter surged to $454 million, as the CARES loan kicked in, compared with $150 million in the 2019 third quarter.

Yellow no longer breaks out operating statistics by company. Instead, it will have four divisions and 17 operating teams supporting its 330 terminal locations. Analysts say those terminals are gold in an era when real estate is scarce for trucking terminals and environmentalists and others make building new terminals an uphill fight.

“What they are doing is creating one network for regional and long-haul,” Satish Jindel, principal of SJ Consulting, which closely tracks the LTL sector, said. “It will result in some revenue leaking from the company because unlike parcel, you have very strong regional competition with one-day transit times. So that is where there will be a few million dollars leaking out.

“But there are no new entrants in the LTL sector, and there haven’t seen since Con-way came on in 1984,” Jindel said. “This is a time for LTL carriers to take control of the market.”

As part of the changes, Yellow will use one enterprise-wide sales team, instead of the four or five under the old network. Terminals with close geographic range and sufficient capacity will be merged, saving costs.

“We’ll be very patient,” Hawkins said. “We have 333 facilities and we continue to evaluate them. This will evolve over time. Customers should see a seamless experience that will only improve over time.”

Hawkins said Yellow is “being very cautious” in each market to factor in  expansion. “We’re well positioned right now to do this at the appropriate pace,” he said. “It’s not an emergency situation.

Fortunately for Yellow, these changes are coming during a cycle that highly favors LTL carriers. Hawkins said he expected the current favorable pricing environment for carriers to last through the “next several” quarters.

“Pricing is stable and firm, it’s a good environment,” Hawkins said. “This should be the case for some time.”