Inside american trucking’s largest bankruptcy..what went wrong.

It’s no secret what caused the collapse-poor management. Sure they acquired all of these other LTL companies but they also acquired their debt load to go with it. In the end the company was hemorrhaging red ink-to the tune of $20 million dollars A DAY!

 

I wouldn't categorize it as greedy - I think it was missapplication of otherwise sound business principles.

Leveraged buy outs can be incredibly profitable for both parties and the economy as a whole.

Growth through acquisition is one of the easiest and fastest ways to scale up a business.

Growth through leveraged acquisition is much riskier, but still a solid strategy in a growing or under saturated market.

Acquiring ABF would have looked like a strong business decision. Increase market share, decrease competition, use economies or scale to lower costs. Had YRC completed integrating their previous purchases, it could have worked. Problem wasn't the acquisitions, it was what management DIDN'T DO after making the acquisitions. They could have been run as wholey owned subsidiaries or they could have been consolidated. Can't do half and half.

 

They purchase 2 other companies whiles in debt for over a billion each. Plus never made a real profit. Terrible Management and the CEO seems to be a pathological liar.

 

Not to mention yrc single handed destruction of jevic and Glenn Moore.

 

Why were they not making money?
Hauling cheap freight?

 

Yes when the incoming is far less then the outgoing it is always going to end unpleasantly.

 

Yes to the cheap freight.

They "had" to haul cheap because their service sucked - metrics were set to maximize bill/cube usage of a trailer and minimize they number of routes while "ignoring" on time pu/del. I also think they focused too much on volume - ie if you're selling for a loss, doubling your sales isn't going to help.

However tbiggest problem was their debt structure and service. $100 million in INTEREST payments a year. Not P&I, just interest. Yeelow interest coverage ratio peaked at 1.2 x in 2018, was .1 x in 2019 and .8 x on the latest earnings. In short, all the after expense earnings could not cover the interest payments.

 

Mismanagement of funding,plus over expansion in acquisitions. In acquiring other LTL companies they also acquired the debt associated with it. Plus they overextended their credit.

Even trucking companies big and small need to know how to live within their means!