How will YRCW lose money f/q/e 6/30/2014
YRCW has over 1200 job openings. They want to hire more than 600 drivers. Per the conference call, demand was up 6% in April at 4% higher rates and May is on track to be even better per the presentation a the Wolfe conference. Also, new trucks and trailers are being leased.
YRCW has nearly 24,000 drivers. Hiring 600+ new drivers represents a REDUCTION in the size of the work force, keeping in mind that many current drivers have deferred retirement while the restructuring has been going on and nearly all the drivers anticipate being able to earn overtime pay in the second quarter. YRCW's unionized work force with adequate health benefits has much lower turnover than non union competition.
The new drivers will be paid less, so there may be greater profits, but they may also be less efficient since they will be new.
Some of the new drivers will not work out. To meet performance guarantees, YRCW may end up having to purchase transportation at high rates, just like happened in the Winter. The goal is to substitute up to 5% of LTL runs with purchased transportation that costs less than YRCW's internal costs, but it is very possible that to meet guarantees, YRCW will purchase transportation at top dollar rates.
One driver stealing a new truck and full trailer could result in sufficient losses to transform the expected net income of 4 cents a share to breakeven. Three trucks and trailers stolen, excess purchased transit, and one gonzo truck driver recruiter who disappears after getting some payments up front, could transform the expected 4 cents a share net profit to a 14-24 cent a share net loss, yet again.
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