Wednesday, August 8, 2012

Controversy in Kansas as Freight 3PL Relocates and Trucking and Logistics Group Speak Out

State Competition for Business Whilst YRC Issue Q2 Figures (and a Wry Smile)
Shipping News Feature

US – With the current situation it is to be expected that protagonists in different sectors of logistics will battle for supremacy but it seems turf wars are not confined to individual companies and corporations. Behind the standard press releases emanating from Kansas this week are a couple of interesting background stories concerning the biggest online 3PL and one of the country’s largest trucking and road freight haulage groups.

It seems there is more to the announcement this week that Freightquote, which claims to be the nation’s number one online shipping broker, is to move headquarters from Lenexa, Kansas to Kansas City. For those unfamiliar with the local geography this would seem to be a minor adjustment, the two are after all, actually only fifteen miles apart. What is the crucial factor of course is that Kansas City sits astride the state line between the state of the same name and Missouri, and the two have apparently been in a battle for economic supremacy for some considerable time. Missouri has used aggressive tactics to maintain its comparatively low unemployment rate, currently 7.1%, sometimes to the cost of its neighbours.

Freightquote will receive a strategic economic incentive package, including $7 million in Missouri BUILD and $26.2 million in Quality Jobs tax credits, which the company can redeem ‘only after it meets the strict job creation and investment criteria of the program’ according to the office of Governor Jay Nixon. The company is to commence building a new $44 million and much is made of the fact that ‘1,225 new jobs will be created with 125 more in the following year’. The point being of course that Freightquote currently employs ‘over 1200 staff nationwide’ and, as a purely online broker with no equipment of its own, all, or nearly all, presumably work in the current facility and will simply be moving ‘down the road’. Bottom line then for Freightquote is that they get a nice shiny, modern office complex for around a quarter of what it would cost them in Kansas itself.

The other Kansas outfit to hit the headlines this week are YRC Worldwide who, whilst producing their latest second quarter figures, managed to find time to smirk a little at the fate of arch rivals ABF Freight System which had included YRC in their latest failed lawsuit against the Brotherhood of Teamsters, a story covered in our archive and an article a few days ago. When YRC was peering into the financial abyss it was the flexibility of their workforce which enabled them to continue to operate, much to the chagrin of ABF.

YRC Worldwide’s actual results were hailed as a moderate success and ahead of its expectations but were hardly inspiring. The net loss for Q2 was $22.6 million on a turnover of $1.25 billion, an improvement on the equivalent 2011 period when the group lost $43 million. Overall the group has lost $104 million in the first six months of the year on revenues of $2.44 billion as opposed to last year’s $145.6 million on slightly less turnover. The company announced it is to roll out 10,000 new handheld mobile devices in order to upgrade track and trace information and expressed satisfaction with the overall results with Jamie Pierson, chief financial officer of YRC Worldwide, saying:

"The approximate $250 million of total liquidity that we reported this quarter is our best second quarter liquidity in four years and speaks to our continued operational improvement and effective working capital management."