Trucking giant sees blue Christmas
Fortune's Matthew Boyle sits down with the CEO of YRC Worldwide (formerly Yellow Roadway) to discuss the effects of economic instability on the transportation industry.
(Fortune Magazine) -- As the head of YRC Worldwide (formerly Yellow Roadway), a $10 billion trucking and transportation company with 27,000 trucks and customers in 80 countries, Bill Zollars has a crow's-nest view of the global economy. From the pace of Chinese manufacturing to shipments of holiday retail goods to fluctuations in gas prices, he has the data to grasp what's happening in economic sectors before the rest of us do. Amid rumors of a bid for YRC by German shipping giant Deutsche Post, Zollars tells Fortune's Matthew Boyle it might be a disappointing Christmas unless business perks up in the next few weeks.
From your perspective, how is the overall economy doing?
New York and most of the world get fixated on the credit crunch, since there's a tendency to be mesmerized by the financial markets. But underlying that is the real economy, which is the movement of goods. That economy is driven by people making and shipping stuff. They are not making and shipping as much [right now], and we see that every day.
Will the recent rate cut by the Fed help?
The tendency has been for the Fed to wait too long with corrective action and then do too much later on. This [latest cut] was not an overreaction, but it might not be sufficient. My guess is more action will be needed, especially when old economic data like the second-quarter GDP gets adjusted - most likely downward.
How is the holiday season shaping up?
We've got a window now of about ten weeks or so where we should really see a big increase in shipment volumes as we get ready for Christmas. We have not seen that, and that's a concern. Last year's inventory buildup for Christmas was lower than historical standards, and the season ended up okay - not terrible. This year you have some easy comparisons, so you would expect to see more of a preholiday inventory buildup, but we have not seen that. Maybe it's coming later. Maybe it's not coming.
What's your prediction for gas prices?
That's a tough one to call. I think they will stay relatively the same. We've had a fuel surcharge in place since 1996, which allows us to pass along the cost of fuel to our customers. So oil won't hurt our prices, but the overall laws of supply and demand do work. The pressure on pricing in the overall economy will be significant.
Getting back to the economy, could things get worse before they get better?
We have not felt the bottom yet. I'm still a bit nervous. Right now, if things continue to deteriorate, I'm worried we may head into a recession. [I feel that] there is a one-in-three chance of a recession. We are prepared for the worst and hoping for the best.