Some shipping officials claim that if YRC Worldwide Inc. shuts down, the price of shipping services for small freight parcels could climb as much as five percent. They say that less-than-truckload (LTL) carriers that consolidate and ship small loads of freight would probably increase rates by 2.5 percent in the month following YRC’s shutdown and an additional 4.9 percent the following years after the company’s failure. Wolfe Research LLC gathered this information while surveying a variety of 150 companies that perform shipping services.
Around 63 percent of LTL shippers surveyed said that if YRC left the market, pricing would be flat or down within a month. Around 24 percent said that pricing would be flat or down a year later. Approximately 3 percent said that shipping rates would climb more than 10 percent within a month of the company’s closing and 9 percent said that rates would jump more than 10 percent with a year if YRC Worldwide goes out of business. The survey’s results present a wide range of expectations from officials in the shipping industry.
“We were somewhat surprised that shippers do not expect, on average, a larger rise in LTL rates immediately following a potential YRC Worldwide shutdown,” the report summary said. “However, respondents indicated that longer term, a YRC Worldwide shutdown ultimately would be favorable for the surviving LTL providers and allow for more substantial rate increases from current levels as demand eventually firms and the LTL providers regain pricing confidence.”
Overland Park, Kansas-based YRC, a heavyweight in the LTL carrier industry, has struggled lately from a combination of debt, falling freight tonnages and customers defecting to other carriers. In the second quarter of 2009, the company reported a $309 million loss and to maintain liquidity, it has cut wages, sold property, integrated subsidiaries, closed facilities, laid off workers, and made agreements with lenders.
Even if the freight company’s union employees approve a second concessions package this year which could save the company an estimated $825 million through 2010, some industry analysts are pessimistic that YRC can avoid declaring bankruptcy past the and of 2009.
