Why YRC Worldwide Shares Dropped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of transport company YRC Worldwide  (NASDAQ: YRCW  ) fell as much as 25% in trading today after unionized workers rejected a new contract offer.

So what: The International Brotherhood of Teamsters did not approve a memorandum of understanding to extend the contract with YRC, putting labor in flux. Management said one reason the union didn't support the extension was that it wanted YRC to reduce debt, something the company did on Dec. 23 in an agreement with debt holders. By that date, many union members had already turned in ballots, so the current balance sheet may not be such a deterrent if the vote were taken again.  

Now what: The December agreement to reduce the company's debt outstanding by $300 million was contingent on the union ratifying a contract extension, so right now both debt and labor have uncertainty. It doesn't appear that either side wants to fight so hard as to sink YRC Worldwide, so it'll just take time to get an agreement done.

The losses YRC has been delivering will keep me out of the stock today, but I don't think today's drop is a reason for bullish investors to panic. I think all parties will give a little and get this issue resolved eventually.

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  • Report this Comment On January 11, 2014, at 12:34 PM, n8cal wrote:

    No the reason it was turned down was because the teamsters have given billions in concessions and the company did NOT pay down any of the debt ! They ( YRC ) could be debt free now and no one knows what they did with all the money. They say they don't have drivers but they are not looking for drivers either. They actually want to use cartage drivers to deliver the freight that they don't have to pay insurance for , a decent wage and also they don't have to pay for the equipment, maintenance or insurance . If the contractor gets hurt, it's on them. So it is a lot bigger problem than they publicly show. Yrc want to be able to fire workers easier so they can use more cartage, not because of absenteeism . They could hire people if needing workers was the problem. The want to get rid of workers . Also I think that the average teamster is tired of being lied to repeatedly. And the company going to the press and saying the teamsters is the problem .The company is trying to screw their best asset , the teamster which has years of experience . They basically want to out source our work but want to look like they are the good guys , and we are not .

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