Sharks circle as YRC struggles to stay afloat
Rivals slash rates in effort to lure customers away from beleaguered LTL carrier.
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News FeedsAs YRC Worldwide Inc. struggles with ongoing financial problems, its competitors are turning up the pressure. For months, the LTL carrier's rivals have engaged in aggressive pricing efforts in a bid to undercut YRC's market leadership (the carrier has a 15-percent share of the fragmented LTL market) and grab some or all of its business. The effectiveness of these efforts has fueled ongoing concerns about YRC's survival.
The latest challenger is FedEx Freight, according to analysts at JPMorgan Chase attending the American Trucking Associations' annual conference in Las Vegas. In a research note, analyst Thomas R. Wadewitz said FedEx Freight seems to have made a "push to gain market share" against YRC and other carriers over the past month. "The effort to attract tonnage through price cuts appears to be relatively broad and aggressive," Wadewitz wrote, adding that the program is "likely to contribute to further pressure on LTL market pricing and also to result in further pressure" on YRC.
An executive attending the ATA conference agreed that FedEx Freight and other carriers "are trying to drive a stake in YRC." The real challenge, says the executive, who asked not to be identified, is convincing customers to accept follow-on rate hikes once the carriers have won the business through discounts. "It doesn't take much effort to cut rates, but it does require skill and genius to raise them," says the executive.
There is precedent for FedEx's taking advantage of difficult market conditions to play pricing hardball with weaker competitors. During the 1990-91 recession, it underpriced smaller rival Airborne Express on air-freight business in what was seen at the time as an attempt to drive Airborne out of business. While the FedEx actions wounded Airborne, the air carrier managed to survive and lived for 11 more years before being acquired by DHL in 2002.
Separately, FedEx disclosed that Douglas W. Duncan, FedEx Freight's CEO, will retire effective February 2010. A successor has not yet been named, the company says.
More articles by Mark B. Solomon
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