If Wishes Were Horses . . .

"Then beggars would ride" goes the rest of the cautionary adage. The YRC turnaround, as reported in CFO Magazine, has been a bit if a marvel, at least in the (pun intended) short haul. Kudos are in order. But, it is way too early to declare victory and bring the troops home.

In a classic set of turnaround moves (and I have been part of a number of radical surgeries designed to either save dying companies, or kill them in the process), new leadership downsized people and operations, restructured debt, attracted some equity investment, and slashed emoloyee pensions and wages.

Even the CFO-friendly magazine, though, admitted that two additional factors were the unexpected timing of some level of national economic recovery and "plain luck". That dark cloud moving in from the West, though, might be a tornado.  Keep your eyes peeled for a mighty wind carrying a Kansas farmhouse and a wicked spinster on a bicycle.

You might imagine (and the union shop status is irrelevant) how demoralized the workforce is with a 15% pay cut and reduced pension contributions that will never be restored. What will that do to talent attraction and retention in an age of often-vicious competition for resources, and how will a runoff of experience affect performance and productivity?

While YRC executes a process to raise prices, over time, across the board, that will be meaningless without the bodies needed to keep trucks on the road. And, non-driver resources are not likely to be able to remain cheerful in an environment that has already cut pay, and will be demanding higher performance levels. The possibilities of sabotage are worth considering.

On top of that, the company still faces a significant pension burden, a bit like the albatross that is sucking some governmental operations into bankruptcy. And, the fleet is not aging; it is already aged. The capital requirements to keep up will be staggering.

And, ultimately, the linchpin operational strategy is to raise prices. There is a real limit to how that move might pay off - or not. Competitors will not idly sit by; they will, even with all the cost pressures faced by all carriers, undercut price increases made necessary by past mistakes, and take great care to deliver impeccable service.

Stay tuned; this could get interesting.