YRCW Guarantees Delivery, But Recovery’s A Long Haul

Freight trucking firm YRC Worldwide (YRCW), which escaped a bankruptcy filing at the end of December through a debt-for-equity swap, yesterday announced a 100% guarantee for customers on deliveries — your package on time, or your money back.

What’s the response from some analysts? Underwhelmed. It’s not the first deal of its kind — these money-back offers started years ago — and it won’t fix what ails the company; that will have to come with time and with an improving economy, analysts believe.

The larger question of whether YRC, or “Yellow,” as it’s commonly known, can in fact bring back customers is of importance to the entire “LTL” industry, which ships freight taking up “less than a truckload.” �Competitors�Con-Way (CNW), Arkansas Best (ABFS), Old Dominion Freight Line (ODFL), and�UPS (UPS) want to know if they stand to pick up YRC’s business or if YRC will be around for the long-haul.

“It’s a bid to get customers back,” observes Justin Yagerman with Deutsche Bank. “YRC desperately need to get customers back” he adds, noting that “Fedex (FDX) had a floodgate of customers come to them in December” presumably many who’d been YRC customers.

Jason Seidl with Dahlman Rose says such guarantees will become the norm in the LTL business going forward, as there’s a frantic fight on for customers coming out of the worst year in the LTL business in 50 years, notes Seidl.

Seidl says he doesn’t see customers returning to YRC “aggressively,” asCEO Bill Zollarssaid a couple weeks ago. But at the same time, the freight incentive may help to hold onto some customers, while some economic improvement may bring back others.

The real question is whether Fedex and the rest can “kill off” Yellow this quarter, which is seasonally weak and expected to be especially rough after low shipment volumes in the December quarter.

Fedex and others have been fighting a price war; Yellow has to contend with those falling pries on freight while trying to buy out those creditors who didn’t take its debt-for-equity swap and at the same time keep its doors open with its remaining cash.

If YRC can make it through the current quarter, “then the rest of the shipping industry will figure they don’t stand much chance of killing YRC if they couldn’t do this quarter,” concludes Seidl.

So YRC is a good barometer of trends in the industry. But as an investment, at a recent price of 94 cents, the stock is toxic: more than a billion new shares will be issued in conjunction with the debt-for-equity swap. That, and a coming reverse split, make it very hard to say what the final dilution will be in the common stock.