Trucker YRC Seeks to Defer Millions in Benefits Payments
By WSJ/Jennifer Smith
One of the largest trucking companies in the U.S. is facing new financial strains that could jeopardize health insurance coverage for thousands of its workers in the midst of a pandemic.
YRC Worldwide Inc., which slashed expenses and struck a deal with lenders to improve liquidity during the crisis, skipped March payments to funds that provide medical and other benefits to its unionized workers. The company has asked to defer millions of dollars in payments for March, April and May, and interim agreements with some funds to cover employees now are set to end next month.
A spokesman for Overland Park, Kan.-based YRC said the company is working with the funds and the International Brotherhood of Teamsters union, which represents more than three-quarters of YRC’s workforce, to ensure employees “have uninterrupted access to healthcare benefits.”
“The Company has asked the funds to basically keep providing health care to our members, while it gets its cash flow sorted out in the short term,” Ernie Soehl, the Teamsters national freight director, said in a May 29 memo to members, adding: “We have made it clear that we simply cannot have our members working without health care coverage.”
YRC is the fifth-largest U.S. trucking company and the fourth-largest less-than-truckload shipping, or LTL, provider by 2019 revenue, according to transportation research provider SJ Consulting Group Inc.
The financial pressures on the company have grown as YRC and its competitors in the LTL sector, in which carriers combine freight shipments for customers on trucks that connect distribution centers, retail stores and factories, have coped with falling freight demand amid coronavirus-driven lockdowns.
YRC is one of the few remaining big unionized trucking companies, which tend to face higher pension and benefit costs than their nonunion competitors. Over the years, the company has struggled under heavy debts and pension liabilities, but it has also won repeated concessions from lenders and employees to help shore up its finances.
It reported a $104 million net loss in a weakening freight market in 2019, but swung to a $4.3 million net profit for the first quarter of 2020 following a $49.1 million loss in the same quarter in the previous year.
The carrier has been a major service provider to large shippers such as Walmart Inc., said Mike Regan, chief of relationship development with logistics and freight management consulting firm TranzAct Technologies Inc. If YRC collapsed, he said, “shippers could see their LTL rates go up significantly.”
But, Mr. Regan said, YRC has “a complete alignment with parties that have a vested interest in having them succeed—the unions and the banks,” adding, “Everyone recognizes that YRC alive is much better than YRC dead.”
Ron Guzzi, Home Depot Inc.’s senior manager of transportation carrier relations and sourcing, said at a Wolfe Research virtual conference last month that the retailer is monitoring the carrier’s status and isn’t scaling back its business with YRC, according to a transcript published by Washington publication CQ Roll Call. The company is making contingency plans in case of a “worst-case scenario,” Mr. Guzzi said, according to the transcript. “But we’ve been there with YRC from the get-go and our intention is to stick with them as they go through any challenging times.”
A Home Depot spokeswoman declined to comment.
This time around, YRC’s white knight could be the federal government. The company is seeking an unspecified amount of relief under the Cares Act, which Congress enacted in March to help companies withstand the financial fallout from the coronavirus pandemic.
In April, the company told a large multiemployer health-care fund that the missed contributions would be paid once YRC received that loan, according to a quarterly report issued last month by a court-appointed independent special counsel overseeing that fund and a related pension fund.
YRC declined to comment on the status of its Cares Act request.