YRC Consolidates Its Management Team

This story appears in the June 8 print edition of Transport Topics.

YRC Worldwide Inc. last week said it was consolidating top management of its less-than-truckload services as it also pursues moves to conserve cash, such as selling its headquarters and negotiating a proposed pension deal for its unionized employees.

Major personnel changes announced June 2 included naming Mike Smid, who previously headed YRC’s national unit, as chief operations officer for both national and regional LTL services.

The company also named John Garcia to be executive vice president and chief sales officer and announced the departure of YRC Regional President Keith Lovetro.

“Today’s announcement is a significant, strategic step as we take advantage of the full power of YRC Worldwide,” said Bill Zollars, chief executive officer. “A functional organization structure allows us to dedicate an even broader team of seasoned experts to the support of our customers along all lines of our business — clearly a competitive advantage.”

The headquarters sale and leaseback was done in the first quarter as part of $176 million in such transactions. The buyer was the local real estate firm of Block & Co., which paid $22 million, the Kansas City Business Journal reported.

YRC will keep its headquarters in Overland Park, Kan., under a 30-year lease.

In an e-mailed statement, YRC described the transaction as “part of YRC Worldwide’s ongoing financial strategy to weather the recession and enhance its liquidity position.”

During the first quarter, YRC used $76 million in cash not restricted by YRC’s credit agreement, leaving $249 million on that basis. YRC has been shoring up its cash position with cost savings from the national LTL service integration, wage reductions and facilities deals.

Meanwhile, Teamsters union officials and pension trustees continued negotiations with YRC about its plan to substitute real estate collateral for cash pension payments.

However, two of the union’s largest pension funds sent letters to the company seeking April and

May cash pension payments that YRC skipped in order to save $34 million to $45 million a month in cash.

Both the Western Conference of Teamsters Pension Trust and the New England Teamsters & Trucking Industry Pension Fund presented formal requests for two months of payments.

While those requests included payment deadlines, Chuck Mack, a Western Conference trustee and retired union vice president, told Transport Topics on June 1 that a payment request was “a normal step” and emphasized the importance of pursuing talks.

“As trust funds we have an obligation to collect the contributions the company is required to make,” Mack told TT on June 1. “We have to protect the plan. With each day that goes by, this becomes a more serious situation.”

“We are still hoping some kind of solution will be found,” he said. “If we can work together as trustees with other trustees, the union and the company to reach an understanding that would provide payment to the plans and continue the viability and operations of Yellow [YRC] — that is the goal here.”

In an e-mailed statement, YRC described the talks as “constructive discussions,” saying it was “pleased with the progress.”

“While we continue the discussions, the pension funds are following their normal procedure to invoice the company and provide notice of late payments,” YRC’s June 2 statement said. “Once an arrangement is made, YRC Worldwide and the pension funds will reconcile the billing. YRC Worldwide remains committed to meeting its contractual obligations to the pension funds.”

If the pension situation isn’t resolved satisfactorily, the company’s participation in the plans could be terminated under federal law, opening the door for potential contingent liability estimated by YRC in April at $4 billion or more.

Union leadership pleaded for patience in a May 27 Web posting.

“At the present time, we are asking all Teamster members at YRCW to remain patient and continue to serve YRCW’s customers so that the company can survive this economic crisis,” the Teamsters’ statement said.

“Members understandably are upset,” said Ken Paff, who heads Teamsters for a Democratic Union, a group of union members seeking more aggressive action by union leaders on pension issues.

Paff told TT, “They are asking, ‘What the hell does this [pension proposal] mean?’ One thing is very troubling. The union leadership isn’t providing any information. The union owes the members some honest information and not just baloney.”

In other organizational moves at YRC, John Carr is taking over as president of the logistics unit, moving up from chief operating officer of that unit and replacing Jim Ritchie, who is leaving the company.

Michael Rapken, executive vice president and chief information officer, is being replaced by Mike Naatz, with the title of chief information and service officer.

Sheila Taylor is taking over as treasurer, replacing Christina Wise. Taylor is vice president, finance and investor relations.

Chief Financial Officer Tim Wicks is leading consolidation of finance activities and Executive Vice President Greg Reid will head up consolidated marketing.

All organizational changes will be done before June ends, YRC said.