YRC Worldwide Inc.

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YRC Worldwide Inc.

10990 Roe Avenue
Overland Park, Kansas 66211
U.S.A.
Telephone: (913) 696-6100
Fax: (913) 696-6116
Web site: http://www.yrcw.com

Public Company
Incorporated: 1993 as Yellow Corp.; 2001 as Roadway Corporation
Employees: 66,000
Sales: $9.9 billion (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: YRCW
NAIC: 48851 Freight Transportation Arrangement; 484122 General Freight Trucking, Long-Distance, Less Than Truckload

YRC Worldwide Inc., formerly known as Yellow Roadway Corporation, operates as the largest less-thantruckload (LTL) provider in the United States and is one of the largest transportation service providers in the world. YRC provides logistics as well as global, national, and regional transportation in over 70 countries across the globe. The company's two largest subsidiaries, Yellow Transportation and Roadway Express, cater to over 300,000 clients in the retail, wholesale, manufacturing, and government sectors in North America. Together, the two companies operate more than 670 service centers and own over 14,700 tractors and over 60,000 trailers, leasing over 2,700 tractors and 3,900 trailers. In 2006, Yellow Transportation accounted for 35 percent of YRC's operating revenues while Roadway Express provided 34 percent of total operating revenues. Yellow Roadway was formed by the 2003 merger of Yellow Corporation and Roadway Corporation; the company took the name YRC Worldwide Inc. in 2006.

HISTORY OF YELLOW CORPORATION

World War I proved the usefulness and flexibility of trucks in moving large quantities of goods and supplies wherever they were needed on the front lines. Soon after the war, the truck became a fixture in cities across the United States. A. J. Harrell, who ran a bus line and franchise of Yellow Cab in Oklahoma City, recognized the importance and potential profitability of transporting goods rather than people. In 1924, Harrell traded his cabs for trucks and established the Yellow Transit trucking company.

The initial years of Yellow Transit were limited to local and short-run less-than-truckload (LTL) shipments, that is, shipments of less than 10,000 pounds, in Oklahoma City and the surrounding area, and between Oklahoma City and Tulsa. The roadway system in the United States, originally built for travel by horse and carriage, and still barely hardy enough for the automobile, could not yet provide dependable longdistance routes for the far heavier truck. Cities were just recognizing the importance of linking with each other and with their outlying, especially farming, areas. For the time being, the railroads continued to dominate the nation's long-distance, bulk transport freight business. Yet demand for transporting small volume, more fragile, and perishable shipments had begun to grow, and, as the country entered the Great Depression, companies came to appreciate the greater flexibility of trucks. Unlike the railroads, trucks could carry small loads to almost any location at any time, allowing companies to deliver inventory faster than ever before. The collapsing economy had left numerous people without work, many of whom rushed to join the young trucking industry. More and more trucking companies appeared, many comprising little more than a single truck, in the rush to meet the demand. Throughout the 1930s, the trucking industry boomed.

The first highways appeared during this time. Improvements in construction techniques made the new roads faster and stronger, and an early, crude highway system connected longer distances. Advancements in automotive technology, particularly the perfection of the powerful and efficient diesel engine, made long-distance hauling not only more attractive, but practical as well. Yellow Transit soon expanded beyond its local routes into state-to-state shipping, reaching south into Texas and north into Missouri. By confining itself largely to north-south routes, Yellow avoided direct competition with the primarily east-west orientation of the railroads. Throughout the 1930s, Yellow continued to grow, adding more and more vehicles, routes, and subsidiaries.

Yellow continued to grow through the 1940s, extending operations into Kansas, Illinois, Indiana, Kentucky, and other states. By the end of the decade, Yellow operated through 51 small subsidiaries, nearing yearly revenues of $7 million. The trucking industry had begun to mature by then, and the era of small, independent truckers was giving way to larger, more efficient trucking corporations. Yellow, its growth limited by rising leasing rates, found itself unable to compete and became financially strapped from paying out dividends. A. J. Harrell sold the company in 1944 and, in 1951, it was forced to declare bankruptcy.

YELLOW'S TURNAROUND AND RAPID EXPANSION

The following year, Yellow was purchased by George E. Powell and other investors. A banker in Kansas City, Powell had also been vice-chairman at Riss & Company, a leading Midwest trucking company. Joining Powell from Riss were his son, George Powell, Jr., and others. Within five months Powell and his team had reorganized Yellow into a more efficient and innovative company, raising it from bankruptcy into the black. With bases in Kansas City and Oklahoma City, Yellow turned its focus to long-haul routes, dropping its shorthaul businesses. With the post–World War II boom to the economy, and with a new emphasis on cost accounting, customer service, and information flow, Yellow began buying trucking companies whose routes would allow it to expand into the north and east. The Kansas City operation began to function as a hub to direct the growing network.

A major development in the trucking industry occurred in 1956, when legislation was passed creating the Federal Interstate Highway System (FIHS). With the end of World War II, the demand for automobiles skyrocketed, and dramatic increases in the volume of transported goods would eventually develop trucking, and truck purchases, into a central element in the country's economy. The FIHS was planned to link into every city with a population of 50,000 or more across the United States, calling originally for 40,000 miles but ultimately reaching 45,000 miles. Freeways were to be constructed according to strict specifications and with their high quality, limited access, and free flow were ideal for the long-haul trucking industry. The FIHS signaled the nation's commitment to the automobile for serving its transportation and shipping needs. Yellow was quick to capitalize on this latest boost to the trucking industry, and by 1957 had reached revenues of $15 million. In that year, Yellow purchased Michigan Motor Freight Lines, its largest purchase to date, further extending its network of routes across the country.

COMPANY PERSPECTIVES

YRC Worldwide's core purpose is to make global commerce work by connecting people, places, and information.

Meanwhile, advancements in tractor-trailer design were creating lighter, stronger, and more efficient trucks. Because of roadway weight limits, and because of rate regulations fixed by the Interstate Commerce Commission (ICC), new income was attainable primarily through increasing the amount of goods each truck could carry, as well as by cutting costs. The lighter, more efficient trucks and trailers allowed trucking companies to ship larger truckloads at less expense, and Yellow's strategy of continuously investing in the latest truck designs, while ridding itself of outdated vehicles and equipment, allowed it to achieve faster service at lower cost than its competitors. As it outpaced many smaller, older operations, Yellow began a period of aggressive acquisition. These acquisitions were especially important to Yellow's growth. The ICC controlled the creation of truck routes, and in order to extend across the country, Yellow would have had to petition that agency for its desired routes. However, by buying other trucking companies, Yellow obtained their existing routes and in this way added hundreds of trucking routes to its network. Into the 1960s, Yellow's rapid growth had made it the nation's 13th largest trucking company, with annual sales of $40 million.

In 1965, Yellow purchased Watson-Wilson Transportation System, launching a new period in the growth of the company. Watson-Wilson was larger than Yellow, with revenues nearing $70 million per year. More importantly, it controlled routes stretching from Chicago to the West Coast. Nevertheless, the company had not kept up with technology advances and changes in the industry, and by the early 1960s was failing. Yellow's purchase of Watson-Wilson, for approximately $13 million, doubled its size. Subsequent acquisitions of Norwalk Truck Lines and other companies extended Yellow throughout the North and Southeast, bringing Yellow a fully connected, coast-to-coast operation. The company changed its name to Yellow Freight System in 1968 and posted revenues topping $200 million by the end of the decade, making it the nation's third largest trucking company.

YELLOW LEADS THE INDUSTRY

An important part of the company's operations were its nine "break-bulk" centers. Serving as hubs along the various legs of Yellow's network, these centers received shipments from one leg, broke down the products according to their following destinations, then loaded the trucks traveling those routes of the network. Break-bulk centers, apart from being labor-intensive, required a high degree of coordination among shipment arrivals and departures in order to achieve maximum speed and efficiency at the lowest cost. Yellow accomplished this with the 1971 installation of a computer-monitoring system, based in the Kansas City command center, placing it at the forefront of the industry. The use of computer technology allowed Yellow to track each shipment precisely, improving information flow within the company and with its customers as well, while gaining a finely tuned coordination of shipment arrivals and departures at its break-bulk centers.

KEY DATES

1924:: Oklahoma City cab driver A. J. Harrell establishes Yellow Transit Company, a trucking operation.
1930:: Roadway Express is founded by brothers Galen and Carroll Roush in Akron, Ohio.
1952:: George Powell purchases Yellow Transit.
1956:: Carroll Roush sells his shares of Roadway to the public for about $5 million.
1965:: Yellow acquires Watson-Wilson Transportation System, doubling its size.
1982:: A holding company, Roadway Services, Inc., is set up with Roadway Express as its chief operating subsidiary.
1992:: Yellow enters the regional less-than-truckload (LTL) market with the purchase of Preston Trucking Company.
1993:: Yellow Freight restructures into a holding company, changing its name to Yellow Corporation.
1996:: Roadway Express is spun off as a debt-free company with its own stock listed on the NASDAQ.
1998:: Yellow forms global subsidiary YCS International.
2001:: Roadway acquires Arnold Industries Inc.; Roadway Corporation is formed as a holding company with Roadway Express Inc. as its main subsidiary.
2003:: Yellow and Roadway merge to form Yellow Roadway Corporation.
2005:: The company acquires USF Corporation.
2006:: Company name is changed to YRC Worldwide Inc.

These innovations, and tight discipline, brought the company's operating ratio to among the lowest in the industry. Further acquisitions—of Adley Express in 1973, Republic Freight Systems in 1975, and Braswell Motor Freight in 1977—strengthened its route network into the Pacific Northwest, the Southeast, and throughout the Southwest. By then, Yellow had reached 44 states, operated more than 220 terminals, and, despite dramatic rises in fuel prices since the 1973 Arab oil embargo, sustained an average 32 percent return on equity. During this time, George Powell stepped down as chairman, and his son George, Jr., took over. Despite a misadventure into oil and gas exploration—the company opened Overland Energy Company in 1976, which lost some $60 million by the end of the decade—Yellow underwent a period of sustained growth throughout the 1970s.

A MORE COMPETITIVE MARKET

The 1980 deregulation of the trucking industry, amid a wave of deregulation that occurred during the Reagan administration, caught Yellow by surprise. Gone were the restrictions on truck routes, and with it the $34 million per year Yellow earned through licensing fees charged to other companies to use its routes. When deregulation came, Yellow discovered that its terminals, depots, and break-bulk centers had fallen behind advances in the industry, at a time when these facilities had become more crucial to the LTL market than ever before. Yellow's main competitors, Consolidated Freightways and Roadway Express, had gained the edge on both break-bulk handling and broader route systems, each with a wider, larger array of state-of-the-art terminals and depots. By the end of 1981, Yellow had laid off 20 percent of its workers.

Yellow's profits continued to fall through 1983. However, Powell, Jr., and his son, George Powell III, who had entered the family's business some years earlier, began a crash program to upgrade its facilities, converting 17 terminals into additional break-bulk centers in two years. Yellow also increased its LTL freight contracts to encompass nearly two-thirds of its business, and by 1985, Yellow had expanded its number of terminals to 600. The intense competition that followed deregulation closed many trucking companies, and by 1986, Yellow was once again assured of its number three position in the industry. With only Alaska left unrepresented in the United States, Yellow created a terminal there in 1987. As it entered the 1990s, Yellow, now led by George Powell III, turned to international expansion into Mexico, Puerto Rico, and Canada.

Yellow's revenues had passed $2 billion. Yet discounting across the industry, a series of Teamster strikes, higher fuel and labor costs, and a slow softening of the LTL market began to cut into Yellow's profits. Yellow boosted its competitive edge with a series of innovations, including computer software to enable its customers to track their shipments, as well as the introduction of its Metroliner two-day service and its guaranteed Express Lane service, which offered expedited shipments. Yellow entered Mexico in 1991, forming Yellow Freight Mexicana, and further increased its Canadian presence.

Yellow also began to eye entry into the growing regional LTL market, reasoning that its customers wanted a company that could handle both their regional and national needs. In 1992, Yellow bought the ailing Preston Trucking Company, a regional and interregional LTL carrier, for $24 million and the assumption of that company's $116 million in debts and loans. After restructuring, including a temporary 9 percent pay cut to its workers, Preston was profitable again by 1993. The purchase of Preston brought Yellow into the important regional markets of the Northeast and South. However, drivers at both Yellow Freight and Preston were represented by the Teamsters union, leaving Yellow increasingly vulnerable to the threat of strikes. In 1992, Yellow formed a Texas subsidiary, Yellow Transportation, extending its regional business in that important state. Significantly, Yellow Transportation leased its trucks and hired only nonunion drivers. In 1993, Yellow Freight was restructured as a holding company for its subsidiaries, changing its name to Yellow Corporation. Also in 1993, the company acquired Saia Motor Freight Line, a southern LTL carrier.

Yellow's steady growth had slowed, however, as it entered the mid-1990s. A 24-day Teamsters strike in 1994 resulted in more than $25 million in losses for Yellow, while rough winter weather that year further slowed the trucking industry and depressed profits. LTL demand continued to slow, and discounting among truckers became more and more competitive. A 5 percent wage increase instituted in April 1995—a result of 1994's Teamsters strike—further ate into Yellow's earnings, and the company posted a $30 million loss for the year.

In early 1996, with the company floundering, George Powell III resigned from his post as president and CEO. He was replaced by A. Maurice Myers. Myers, previously the president and COO of America West Airlines, had gained a reputation as a "turnaround leader." With Myers at the helm, Yellow wasted little time making changes. Yellow Freight, the company's main subsidiary, was reorganized into five business units, which decentralized decision making and placed a greater emphasis on responding to customers' needs. Almost 250 jobs were eliminated in the restructuring. Even so, 1996's numbers were far from encouraging. With revenues remaining flat, Yellow ended the year with a $27.12 million loss.

In 1997, the company began to reap the rewards of its cost-reduction efforts; it moved back into the black with year-end income of $52.4 million. In a January 28, 1998, press release, Myers attributed the improvement largely to $145 million in savings at Yellow Freight, and indicated that in the coming year, Yellow Corporation would focus on reducing expenses at its other subsidiaries as well.

Myers's turnaround plan did not consist solely of cost-cutting. He believed that for Yellow to be successful it had to become more flexible and diverse, offering a portfolio of services rather than strictly LTL shipping. Toward that end, the company spent 1998 and 1999 pursuing expansion both at home and overseas. In June 1998, Yellow formed a new subsidiary—YCS International—to serve as Yellow's international carrier. Through alliances with various international partners, YCS (which was renamed Yellow Global in 2000) allowed the company to offer shippers greater geographic coverage.

Yellow also made two key acquisitions. In 1998, it acquired Action Express, a regional carrier that expanded the company's interregional coverage to the Pacific Northwest. A year later, Yellow acquired Jevic Transportation, a regional carrier covering the Eastern and Midwestern parts of the country. Meanwhile, Yellow rid itself of its struggling subsidiary Preston Trucking. In November 1999, having restored Yellow to profitability, Maurice Myers, the company's "turnaround CEO," resigned. He was replaced by William Zollars, who had served as the president of Yellow Freight since 1996 and had been instrumental in the restructuring at that subsidiary.

YELLOW ENTERS A NEW CENTURY

Yellow began the 21st century in a fitting way—by entering the new economy. In February 2000, the company partnered with two venture capital firms to form Transportation.com, an online transportation management company. Transportation.com provided logistics services such as shipment and inventory management and tracking to small and medium-sized businesses. Yellow believed that its online subsidiary could be a big earner, since it would have a much higher profit margin than the asset-based trucking subsidiaries.

In 2000, Yellow Corporation recorded the best financial performance in its history, with net income of $68 million—a 33 percent increase over the previous year. In 2001, however, a weakening economy caused the company's earnings to decrease significantly. In a June 2001 interview with CNNfn, Yellow CEO Bill Zollars said that the company planned to deal with the downturn by continuing to build broader capabilities, focusing on high-growth global services and looking for ways to reduce expenses until the economy rebounded. Zollars also indicated that much of Yellow's future growth would come from acquisition, as the transportation services industry continued to consolidate.

HISTORY OF ROADWAY EXPRESS

Roadway Express was founded in 1930 by brothers Galen and Carroll Roush in Akron, Ohio. Although trucking had made great strides during the 1920s, the motor carrier industry was still in its infancy. Railroads provided the primary transportation for goods from point of manufacture to point of sale. Trucks were used for less than full-load shipments, which was still Roadway's primary market. In 1930 Roadway entered the business it would come to lead with a load of tires shipped from Akron to St. Louis, Missouri.

Roadway Express started with ten owner-operators, and moved shipments to Chicago; Houston, Texas; and Kansas City. Within several months terminals were opened in Atlanta, Georgia; Baltimore, Maryland; Birmingham, Alabama; Charlotte, North Carolina; Indianapolis, Indiana; Knoxville, Memphis, and Nashville, Tennessee; New York City; and Philadelphia, Pennsylvania. Roadway's rapid expansion reflected the growth of interstate trucking in general.

Before long, railroaders, fearful of unrestrained competition, began to clamor for regulation. In 1935 Congress passed the Motor Carrier Act, limiting the right to operate in interstate commerce to those carriers already in operation and to new ones that could prove "necessity and convenience." The ICC would oversee standard rates, preventing particular customers from receiving preferential rates.

While regulation had its disadvantages, founder Galen Roush, originally trained as a lawyer, saw great potential in the new regulated business climate. Roadway had kept detailed records of its shipments over the years. These records became the basis of Roush's claim to some of the busiest freight routes in the country. Regulation helped limit competition, and at the same time elevated the status of the trucking industry to the equivalent of a public utility. Although it took 16 years of court battles before Roadway's routes were finally secured, the company held exclusive rights to its most lucrative routes.

The Roush brothers recognized the significance of hiring good managers, and instituted tight financial controls early on. Roadway was conservatively run, and kept a very low profile. It maintained this approach for decades.

WORLD WAR II AND ROADWAY'S POSTWAR EXPANSION

In the 1940s demand for truck transportation increased as the defense economy of World War II eliminated the last effects of the Great Depression. At the same time, new trucks were not being built as the necessary materials were being diverted for war goods. In 1945 Roadway Express began replacing owner-operators with hired drivers to run its own fleet. After the war, trucking gained significant ground from the railroad industry. By 1950 the ratio of truck to train ton-miles was 20 percent, twice that of two years earlier. Roadway began to stress its LTL service in the early 1950s. The price charged per pound shipped was sometimes three or more times the cost of a full load, and the flexibility of the service improved the chances of a return load.

Business boomed, and Roadway needed to establish a broader terminal network. The company's excellent financial record helped Galen Roush convince Chase Manhattan Bank to lend Roadway millions of dollars for expansion. Trucking companies were previously poorly regarded by most financiers. By 1956 Roadway's fleet and terminal expansion program had progressed to the point where Roadway no longer used owneroperators at all.

In 1956 Carroll Roush, the younger of the two founding brothers, decided to sell his interest in Roadway. Barely speaking with his brother, Galen, Carroll sold his shares to the public for about $5 million. Traveling west, he bought ONC Fast Freight, which later became a part of ROCOR International.

In the late 1950s and 1960s, Galen Roush set out to expand the terminal network. Population centers were spreading out, and trucking needed to be less centered around big cities. The greater number of terminals allowed decentralized service. Roadway Express expanded its network from 60 terminals in 1958 to 135 in 1968.

At the same time, Roadway instituted the most sophisticated accounting procedures in the industry, which were the brainchild of cost accountant John L. Tormey. The company could identify profit and loss by route, commodity, weight bracket, and individual customer. As the company expanded rapidly, it was able to focus on profitable business and easily control costs. Roadway truckers continued to haul LTL shipments and produce higher profit margins. Each terminal was a profit-and-loss center, and aggressive managers were enriched with hefty bonuses.

NEW HORIZONS FOR ROADWAY

Roadway's expansion during the 1960s required heavy borrowing, but the decision to risk the debt paid off later. The loans were paid off by the 1970s, and cash flow was high. Meanwhile Roadway's competitors were still heavily burdened. When the recession hit in 1974 and 1975, this financial strength kept Roadway in the leading position in the industry despite the economic hard times. Roadway's return on investment averaged 20 percent a year in the early 1970s. Direct coverage grew to 40 states in the mid-1970s, and the company became a transcontinental carrier in 1977.

In 1980 deregulation of rates and services opened new avenues for motor carriers. This gave Roadway Express the opportunity to expand into new areas of business, but at the same time, the company faced new challenges from competitors. While other trucking companies slashed prices to attract customers, Roadway marketed itself as the high-quality carrier with the widest geographic coverage, and clung to its high margins. By 1982, however, with revenues slipping, Roadway chose to discount its prices. The company had fallen to third in market share, surpassed by Yellow Freight and Consolidated Freightways. Realizing the need to step out of the shadows and reassert its position, Roadway launched its first advertising campaign in history.

After the initial shock of deregulation settled, Roadway embarked on a campaign of acquisition and new services. In 1982 a holding company, Roadway Services, Inc., was set up with Roadway Express as its chief operating subsidiary. In 1984 Roadway Services acquired Spartan Express, Inc.; Nationwide Carriers, Inc.; and Roberts Express, Inc. Spartan Express, Roadway's first acquisition, operated as a short-haul carrier in the South. Unlike Roadway Express, Spartan handled shipments with 24- and 48-hour service requirements. Nationwide Carriers specialized in irregular route truckload shipments throughout the continental United States. Nationwide hauled dry freight, temperature-controlled freight, and freight requiring flatbed transport. Roberts Express specialized in critical or fragile shipments needing special handling or speedy delivery.

In 1985 Roadway's earnings dipped for the first time in 32 years. Conversion of Roadway's truck fleet to twin trailers and start-up costs of a new unit were the chief reasons. The new subsidiary, Roadway Package System (RPS), got a slow start, but became a transportation success story in the 1980s.

RPS set out to take a piece of the $12 billion smallpackage surface delivery business, then dominated by United Parcel Service (UPS). RPS concentrated on business-to-business delivery of packages of up to 100 pounds, and implemented some innovative procedures to keep costs down. By selling or leasing RPS trucks to independent owner-operators, the company cut labor costs to 60 percent of UPS's while giving each driver a personal stake in efficient service.

It took three years and $103 million in investments before RPS showed a profit, but considering the scale of the start-up, it was an impressive accomplishment. By 1988 the subsidiary boasted 130 terminals, and geographic coverage of 70 percent of the United States. By 1990, 147 terminal facilities served 42 states. While UPS had 20 times the revenue of RPS, Roadway's subsidiary had carved a healthy niche out of a growing segment. RPS contributed one-fourth of Roadway Services' profits in 1989. Growth prospects looked excellent.

Roadway Services, meanwhile, continued to seek LTL carriers that would complement its existing geographic coverage. In 1988 Roadway acquired Viking Freight, the largest regional carrier in the western United States. Viking had two operating subsidiaries: Viking Freight System, a regional LTL carrier, and VFS Transportation, an irregular-route truckload carrier. Viking was almost alone among carriers in being nonunion.

In 1989 Roadway closed its Nationwide Carriers subsidiary. Nationwide had been unprofitable despite reorganization. The Roadway Express unit struggled with discounted rates in the later 1980s, but successfully held its position against smaller carriers. In 1987, a New York City trucking firm, Lifschultz Fast Freight Inc., filed suit against trucking's big three—Yellow Freight, Roadway Services, and Consolidated Freightways—charging predatory pricing and conspiracy to restrain trade and free competition in certain segments of the industry. The suit sought $598 million in damages. Lifschultz lost his case, but appealed it all the way to the U.S. Supreme Court. When the Supreme Court finally declined to hear the case in 1993, the big three trucking firms had spent more than $6 million in refuting the charges made by Lifschultz.

Competition from the railroad industry also grew fierce as the 1980s closed. Threatened by the prospect of bigger double and triple trailers hauling freight on highways, railroad lobbyists launched campaigns painting a grim picture of motor carriers' safety standards. When one such group, the Coalition for Reliable and Safer Highways (CRASH), used a photo of a Roadway Express truck accident at government hearings in California, Roadway's chairman Joseph Clapp objected, citing Roadway's top safety record. Competition between railroaders and truckers promised to become increasingly heated in the 1990s.

CHANGES FOR ROADWAY

In March 1990 Roadway's Roberts Express unit launched a European subsidiary, Roberts Express, B.V., headquartered in Maastricht, the Netherlands. The subsidiary offered Roberts's traditional services in Belgium, France, Luxembourg, the Netherlands, and Germany. Roadway Express in 1990 set up a Mexican subsidiary, Roadway Bodegas y Consolidacion, and expanded operations in Canada.

As Roadway Services entered the 1990s, its various units showed mixed results, although as a whole the company continued to expand. Roadway Express increased revenues and profits. Spartan Express was divided into two geographic divisions in 1988 but remained unprofitable; in 1990 it became a subsidiary of Viking Freight. Roberts Express's growth was good, but less than expected. RPS and Viking Freight both performed well, but the latter's VFS Transportation subsidiary did not, and was closed down in 1990. The surface transportation industry was in for some turmoil, as railroads promised to fight for their space, and as air transport became more competitive. Roadway had dropped its image as a stodgy company, and no longer hesitated to step into the public eye as had been characteristic of the company from its founding through the 1970s. The change at Roadway Services was characteristic of the industry as a whole, illustrated by the fact that in 1991 the Dow Jones transportation averages added Roadway Services as one of the key indicators of the industry's overall performance.

A depressed economy and the pressure of low-cost competitors kept prices down for Roadway in 1991. Its two major competitors, Yellow and Consolidated Freightways, both announced price increases that year. However, when Roadway declared that it would not hike its rates, the other two companies backed down. The whole LTL industry was operating with very narrow profit margins. In this environment, Roadway Express found that it was competing with its sibling companies for resources from parent Roadway Services.

Nevertheless, Roadway pressed for expansion. It began offering services to 20 countries in Europe in 1991, and opened export services to the Middle East two years later. It also extended its reach to 24 ports in the Pacific Rim. Much of its international business was shipped from North American origins to port cities, and then to England. From the English distribution site, cargo went on to further ports. Roadway developed an advanced Internet tracking system to handle its international shipping.

Roadway Express differed from the newer companies that had come under the wing of Roadway Systems in that it was unionized. The Teamsters Union had negotiated salaries and benefits for their workers that were up to 30 percent more than nonunion companies were paying. In 1994 the Teamsters called a strike at Roadway Express that lasted for 24 days. The union was trying to resolve issues of job security and the use of part-time labor. The strike put the Roadway Express in the red for $68 million for that quarter, and the company felt the effects for at least the next year.

When Roadway Systems announced in August 1995 that it was spinning off its principal subsidiary, analysts suspected that the company was trying to ditch its unprofitable unionized member. Roadway Systems changed its name to Caliber System, Inc., and moved out of the old Akron headquarters. Its components were then Roadway Package System, its small-package carrier; Roadway Global Air, its air and freight package carrier; and a group of small nonunion regional carriers, including Roberts Express and Viking Freight. Roadway Express was spun off as a debt-free company with its own stock listed on NASDAQ. Its revenues at the time of the spinoff were approximately $2.2 billion, and it served around 500,000 customers worldwide.

The expectation among trucking analysts seemed to be that Caliber would prosper, and Roadway Express might well go under. Its unionized workforce was seen as a huge disadvantage, and Caliber's newer companies were expected to prevail. Instead the opposite happened. A year after the spinoff, Roadway announced profits of $21.8 million. Under its new organization, the company had taken measures to cut costs considerably, closing more than 100 of its shipping terminals and saving on administrative costs by dividing its operations into four regional units instead of five. Roadway's CEO, Michael Wickham, went to Teamsters headquarters and outlined a plan for cooperation between workers and management that would keep the company competitive. Wickham kept costs down without asking for monetary concessions from the union, and, as a result, got an extremely loyal workforce. Turnover at Roadway was less than 3 percent annually, while it was not unusual for similar firms to have turnover of close to 100 percent. Roadway did not need to expend resources recruiting and training, and that in itself translated into significant savings for the company.

Roadway seemed poised for greater success free of its holding company. In 1997 Roadway spent $15 million to acquire a Canadian trucking firm, Reimer Express Lines. It expanded its access to Asia by launching Asian Roadway Express, and it released a new computerized tracking system that allowed its agents worldwide quicker access to shipping information. In April 1998 Roadway reached agreement with the Teamsters on a new five-year contract. The contract offered a slight wage and benefit increase, but its longevity was considered its best feature. The five-year span promised a period of stability for both company and workers.

Like competitor Yellow, Roadway anticipated growth in the coming years to result from acquisitions as the industry consolidated. Roadway added Arnold Industries Inc. and its subsidiary New Penn Motor Express Inc. to its arsenal in 2001 and stood poised to benefit from additional business brought on by the shuttering of LTL competitor Consolidated Freightways in 2002. The company adopted a holding company structure in 2001, forming Roadway Corp. to oversee its main subsidiary—Roadway Express.

YELLOW AND ROADWAY MERGE

During the early years of the new millennium, both Yellow and Roadway were on the hunt for acquisitions that would strengthen their businesses in the wake of recent industry consolidation. In the summer of 2003 Yellow announced plans to buy Roadway in a deal worth nearly $1 billion. The merger formed Yellow Roadway Corp., one of the largest transportation companies in the world. Yellow's chairman, president, and CEO Bill Zollars commented on the merger in a July 2003 Journal Record article claiming, "This strategic combination brings the strengths of Yellow and Roadway together to capture significant synergies and growth opportunities." Indeed, within one year of the merger, the company had saved $100 million in expenses and posted record earnings of approximately $4 per share.

Management believed that part of the company's success was due to its decision to keep both the Yellow and Roadway brands separate after the merger. With little to no business interruption from a consumer standpoint, the company was able to progress with a "business-as-usual" attitude. This strategy appeared to have paid off with additional cost reductions of approximately $100 million in 2005 and the posting of record revenue and earnings. Revenue and operating profit continued to grow in 2006.

During 2005 Yellow Roadway added competitor USF Corporation to its arsenal, giving it a stronger foothold in the next-day and regional transportation business segments. On the international front, the company partnered with Jin Jiang Investment to provide transportation services in China. In 2007, YRC set plans in motion to acquire Shanghai Jiayu Logistics, one of the largest LTL carriers in China.

By this time, the company had operations in 70 countries and provided logistics as well as global, national, and regional transportation services. In 2006 Yellow Roadway adopted the YRC Worldwide Inc. moniker to reflect its growing international presence. It also restructured certain businesses and formed YRC National Transportation to oversee the operations of Yellow and Roadway along with Canadian-based Reimer Express.

During 2007, YRC's earnings began to fall as fuel costs continued to rise. Speculation arose that the company could become a takeover target of a larger transportation company such as DHL Worldwide or FedEx Corporation. As the transportation industry continued to consolidate, YRC's success left it positioned as an attractive suitor.

Thomas M. Tucker and

Shawna Brynildssen

Updated, A. Woodward;

Christina Stansell Weaver

PRINCIPAL SUBSIDIARIES

Yellow Transportation Inc.; Roadway Express Inc.; Reimer Express Lines Ltd.; New Penn Motor Express Inc.; USF Holland Inc.; USF Reddaway Inc.; USF Glen Moore Inc.