YRC Trucking is a survivor as well as being a significant railroad customer. It’s a combination of two former giants in LTL trucking, Roadway and Yellow Freight.
The LTL system was designed by Federal bureaucrats attempting central economic planning when trucking came under Federal economic regulation. (Regulation imposed for absolutely no valid economic reason.) The system was hopelessly inefficient but it survived and prospered because similar Federal bureaucrats protected it from competition. This included rail competition. The Feds literally killed the railroad’s LCL operations.
Roadway and Yellow combined their companies and survived, barely. Other LTL carriers died like flies with trucking deregulation. They simply could not compete while saddled with their inefficient, government designed, operations.
But! A few years ago YRC was also in trouble. They made it through by basically giving the company to its creditors. That kept them going until the COVID-19 shut downs. They’ve had to do things such as quit paying their health insurance premiums for their employees’ health coverage. They asked the insurance companies to maintain the coverage without getting the premiums. AFAIK, the insurance folks went along with it, but they weren’t going to do that forever.
Enter the Federal Government once again. They’ve given YRC a $700 million “Loan.” In return for this “Loan” the Feds now have a 29.6% ownership of YRC.
Don’t laugh, but the US government owned and ran the Mustang ranch brothel 32 miles east of Reno. Nevada. They ran it for about 18 monthes until it was sold to anothe brothel owner.
Yes it is. Joe Conforte who owned the Mustang Ranch was convicted of tax evasion in 1999. It was forfited to pay back taxes. Run by the US Marshalls Service until sold. BTW: Joe Conforte fled to Brazil and lived out the rest of his life down there. What I like most is that a federal law enforcement agency wa running a brothel!!!.
Well, as Reagan said, Government’s view of the economy could be summed up in a few short phrases. If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
YRC stock up a whopping 74.9% today. Just think… had you bought $1 million in shares yesterday you’d be $749,000 richer today. Insiders who knew this bailout was coming are happy campers today no doubt… and likely selling first thing tomorrow morning to lock in their good fortune.
Thank you for the additional information regarding YRC’s lineage. In the account I read earlier, it was mentioned that the YRC is considered essential to this country’s defense by the pentagon, and that is a big reason for the bail out. I guess there was also some misgivings about this company’s history, given prior accusations of having bilked the government on some of it’s contracts.
Question though regarding the text I’ve highlighted above. You say that regulation served no valid economic purpose, yet go on to mention that in the wake of deregulation that many ltl carriers “dropped like flies”.
I remember well your personal long standing disfavor for regulation, but wouldn’t it be fair to say that regulation must have been serving the economic interests of those carriers who subsequently failed in it’s absence?
Protecting a company from competition is not a valid economic action by the government. It simply allows such a company to charge more and offer poorer service. The customers, by goverment edict, have no viable alternatives when such alternatives would otherwise be readily available. This allows the protected firm(s) to generate monopoly level profits. (That’s what was going on with the LTL carriers.) The LTL carriers fought like Hell against deregulation because they wanted to keep their sweet deal.
It’s important to know the truism “End users bear all costs.” If someone buys a can of tomato soup and eats the soup that person pays for everything involved. They pay for the tomatoes, the can, the label, the productiion, the transport, stocking the shelf, etc. It’s all in the price of the soup.
It harms the consumers of the general population when the government acts to artificially create and protect monopoly level profits for any member of the supply chain that gets the soup on the shelf.
Yes, the LTL truckers were better off under regulation. But it was to the detriment of everybody else.
I don’t buy this “Essential to the Pentagon” thing. The DOD may use YRC a lot, but if they shut down tomorrow other carriers would be standing in line to move the freight.
I will bend on one thing. YRC has 30,000 employees with health care and retirement benefits, etc. 2
Okay, …but bare with me for a second. We all know what happens to an industry after just a handful of heavyweights come to dominate it.
So, by keeping more players in the game, couldn’t this conceivably be considered “preserving” competition?
The regulations might have artificially preserved 20% margins for dozens of competitors, whereas if the industry is dominated by only a couple, they might eventually carve up the market between them such that they each enjoy “spoils” that afford them each 40% margins .
You might loosely call this latter arrangement “private regulation”…or more concisely “collusion”.
I realize that with trucking there is not as significant a barrier to entry as there might be with some other modes. So you invariably have some hope that if the market was dominated by just a few,…a new start up comes on-line as a “white knight”. Perhaps the operators kept in business by the regulations were seen as “pre-emptive” white knights? Just a thought.
I don’t think you can force “competition” by propping up the inefficient players in an industry. Perhaps that amounts to nothing more than a subsidizing of an inefficient player. That doesn’t seem like it could turn out well for anyone exept those being propped up.
I spent an inordinate amount of time trying to decide if the phrase is “bare with me” or “bear with me”. Then I started thinking about bears,and then I remembered that I need a vacation. [sigh]
No way. The government, stupid as they are and always shall be, would not allow competition.
There was one rate, charged by all regulated motor carriers. To deviate from this rate was to violate a Federal law. The carriers were flat out required to act in collusion. The whole purpose was to protect a selected few at the expense of many.
How in the Blazes would any firm get to be “Dominating” in trucking (or railroading) unless the government throws up barriers to entry? Which is what happened.
Do you honestly believe all government actions are founded in reason? Hell, in this same time period they were trying to regulate the price for cleaning and pressing a dress shirt. FDR’s follies weren’t beat back until the US Supreme Court rulled the government couldn’t set the price for live poultry bought in New York City.
Consumers would buy live chickens for home consumption in NYC. The Federal government, doing its best to imitate the Soviet Union, said the price of each chicken would be 25 cents. Period. The merchant and customer couldn’t bargain. The merchant couldn’t put the chickens on sale. Nothing. The customer couldn’t even select his/her chicken. He/she had to blindly reach in and just grab a live chicken sight unseen.
Some brave and determined merchants of NYC took this to the US Supreme Court. And won.
It was an overriding article of false faith that the wise men and women of government knew best. We were all just better off submitting. Kind of like we were house pets.
Truck economic regulation (and railroad economic regulation) came from a faith, not reason.