One On One With William Zollers, CEO YRC Worldwide
Thursday, April 27, 2006
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SUSIE GHARIB: It`s no surprise that trucking companies have felt the strain of high gasoline prices. But YRC Worldwide, one of the nation`s largest transportation companies, has a strategy to cope with volatile energy prices. When I spoke with the company`s CEO William Zollers, I asked him about the impact of rising prices on his business.
WILLIAM ZOLLERS, CEO & CHMN, YRC WORLDWIDE: Well, no direct impact on our business. We, fortunately, put a fuel surcharge in place in 1996 which has really become the industry standard. So we are able to pass through fuel costs pretty effectively.
GHARIB: But Mr. Zollers, you reported on Monday, earnings that were down by about 15 percent compared to the year ago. To what extent did high oil prices and gasoline prices impact the bottom line?
ZOLLERS: It really had no impact on our first quarter. Our first quarter was really a company-specific issue, affected primarily by an inventory adjustment from our retail customer base as well as some cost issues we had that were outside of the fuel cost area. So really no impact from fuel at all in our first quarter.
GHARIB: So you mentioned that you`ve had a fuel charge since 1996.
ZOLLERS: Right.
GHARIB: In these past 10 years, have you found times, because prices have fluctuated so much, have you found times, how often do you adjust that fuel surcharge?
ZOLLERS: Well, the fuel surcharge is tied to the published price of fuel which the government publishes on a weekly basis and our fuel surcharge moves up and down weekly with that published price and goes on the invoice as a separate item. So it is a very quick in terms of how quickly it is applied and it moves up and down with the market weekly.
GHARIB: And what is the new reaction of your customers over this 10- year period of having to deal with this higher additive price onto their services they are getting from you?
ZOLLERS: Right. For a long period of time, it was just considered, I think, a little bit of a temporary charge and it was at a low level. So, really, customers didn`t pay a lot of attention to it. But in the last year with the fuel surcharge being as high as it has been for as long as it`s been, it`s now firmly on the radar screen of all of our customers and it`s an integral part now of the pricing discussion we have with almost every one of them.
GHARIB: So are you saying it is negotiable then with your clients?
ZOLLERS: It is becoming part of that overall pricing negotiation. Yes, that`s right.
GHARIB: Besides the fuel charge, what other measures, what other options do you have in the trucking business to deal with these very volatile energy prices?
ZOLLERS: The fuel surcharge is really the ultimate hedge. So it really is a very effective way of dealing with fluctuation in fuel costs and we really don`t need anything else.
GHARIB: As you plan ahead and you do your internal economic forecasting.
ZOLLERS: Right.
GHARIB: . what are you internally forecasting for the year ahead where oil prices are going to be?
ZOLLERS: We are basically assuming they`re going to stay at about the same level they are at now. We are also assuming that they are not going to have any impact on the economy. As you know, even with these high fuel prices, it`s been amazing how resilient the economy has been. We are saying that fuel prices will probably stay about where they are and the economy will continue to be healthy.
GHARIB: What if prices do go higher from here? Right now they are in the $70 level. Let`s say they go to the 80s, 90s or higher. What would be your reaction to that as a business?
ZOLLERS: Well, you know, we`re going to continue to use the fuel surcharge and that insulates us as I said from those higher fuel prices. We are more concerned I think about the overall impact that these high energy prices might have on the economy. And if it slows the economy, that will have a direct impact on us. It`s been amazing really how resilient the economy has been though even though the prices have been high for a long period of time.
GHARIB: I was looking at your stock and I noticed that it`s been climbing recently. What`s behind the move and can you sustain this momentum?
ZOLLERS: I think people are a little concerned with our first quarter stumble. We have put ourselves back on the right track and have continued our momentum. We have had two record years in terms of earnings and will have another record year this year. So I think it`s just a recognition that we are back on track.
GHARIB: All right, Mr. Zollars thank you very much for coming on our program. We appreciate it.
ZOLLERS: It`s been my pleasure.
