Very interesting article in yesterday’s Wall Street Journal by Alex Roth highlighting how YRC’s competitors are ‘going for the kill’ by undercutting YRC’s prices and talking up its financial problems with clients (see “As YRC Struggles, Rivals Stalk Clients”). In a conference call with analysts last week, William Zollars, the CEO of YRC, said, “We believe our volumes are being impacted by tactics from our competitors that are clearly targeted at buying market share at any price, and attempting to make our financial position seem worse than it is.” YRC’s freight tonnage declined 35 percent in the second quarter, a steeper decline than its competitors.
The article cites some of the tactics competitors are using. For example, Saia sent a letter to some YRC customers offering prices “equal to a 12% discount off the current pricing the [customer] currently has in place with [Yellow or Roadway].” Others are highlighting how their freight could be stranded across the country if YRC suddenly goes out of business because “companies in trouble never give customers a heads-up that they are near the end.”
There’s nothing illegal about these practices, but are they the “ideal” way to compete?
I remember several years ago, there used to be a marketing executive at a leading software company who would spend the first hour of every briefing telling me how much their competitors sucked. Although I never had the nerve to cut him off, what I wanted to tell him was: Don’t talk to me about your competitors; tell me about what’s new with your products, how your customers are benefiting from using your solutions, and about your product development plans.
Yes, I know, highlighting your competitors’ weaknesses is a common selling tactic. But in my view, it should come at the backend of the process, after you’ve demonstrated your unique capabilities and value proposition. Take the high road first is my philosophy.
(Then again, we’re talking about trucking services here. Is there even a high road to take?)
Is YRC too big to fail? This was the question I asked earlier this year, and I still don’t have a clear answer. Some folks believe YRC will survive, others are betting against it. For example, in a Credit Suisse report published last month about Con-way (“What If Yellow Doesn’t Fade to Black? A Contrarian View of CNW”), the authors argue that if YRC were to file for Chapter 11, and the case is resolved in an expedited manner like the bankruptcies of GM and Chrysler, its customers wouldn’t necessarily flee in droves to competitors. But when it comes to bankruptcies, GM was the exception rather than the rule. What if YRC files for bankruptcy and it takes a year or more for the company to emerge from it?
It’s a dog-eat-dog world out there.
Are you concerned about YRC’s viability? Have you shifted your freight spend to other carriers? Would you stick with the company if it filed for Chapter 11? Are YRC’s competitors knocking at your door spreading fear, doubt, and uncertainty? Are you influenced by these tactics or do they turn you off? Post a comment and share your viewpoint!
Adrian,
The more I read about the financial status of YRC, the more encouraged I am that they will survive. It seems no one wants to own a LTL carrier (bankers, government, Teamsters, competition). The banks keep adjusting YRC’s obligations, the teamsters make concessions, etc. In fact, if they file chapter 11, which might be a good idea, what will the government do when thousands of retires have no pension? Further, I’m sure the government doesn’t want to see several thousand people added to the unemployment rolls.
What does concern me is their continued loss of business. They can get all the help they want from banks, governments, and unions, but if they don’t have any business, it won’t matter.
With regard to pricing, we are seeing YRC be very competitive on pricing, but have not had the best price in all negotiations we have done this year. They’re willing to be aggressive, but not giving away the farm yet. Interestingly, we have seen other carriers less aggressive on pricing the past 30 days.
As you say, it’s too soon to tell whether YRCW will make it, but it will be interesting to see what happens. It might be more interesting to see what happens to LTL pricing when the largest provider is removed from the supply side.
giles