YRC Worldwide: Trucking in Trouble

Nov. 2.09 | About: YRC Worldwide, (YRCW)

YRC WorldWide (NASDAQ:YRCW) is tanking over 50% on bankruptcy speculation. The large trucking company has been entangled in brutal labor renegotiation’s and is at the heart of the economic downturn with their highly economically sensitive transport based business.

On Friday the company reported a $158.7MM loss which was followed up by a debt exchange announcement this morning. Investors are growing increasingly concerned that the announcement could result in an eventual Chapter 11 filing. Although the company is having cost difficulties (primarily labor related) the weakness at the company is primarily economically related. On the conference call CEO Bill Zollars detailed the economic struggles which we continue to see across the entire real economy. His comments would be most unwelcome to anyone who has bought into the recent stock market surge which is now not only very expensive, but pricing in very optimistic economic and earnings growth in 2010:

“The operating environment remains very challenging as we continue to face a difficult economy that appears to have stabilized, but is not showing any signs of sustained positive momentum. We remain cautiously optimistic that the economy has bottomed out, but it remains too early to know for sure. We’re not anticipating any growth in the economy for the remainder of this year and at least for the first half of next year.”

I think it’s safe to say that the stimulus based recovery is almost entirely non-organic. Without further aid from the government and the Federal Reserve this liquidity driven market is likely staring at a very difficult road ahead, if not the dreaded double dip.