YRC Has Plans For China

Tuesday, April 3, 2007 15:28

18 months ago YRC made their first acquisition in China, JHJ International, a company specialized in providing trucking solutions in China. Initially heavily promoted, they were ahead of UPS, FedEx, and TNT in making an acquisition in the long haul trucking space.

Since then though, all has been quiet. Eerily so….

UPS, FedEx, DHL, and even Zim Logistics have also bought into this market and each have employed large business development groups to make sure manufacturers know it.

At the same time, groups like Kerry Logistics, HTB Logistics, and IDS Logistics have continued to invest in their networks(primarily through organic means) in China and are closing accounts that were once only serviced by the larger international groups.

Yet, YRC remained quiet.

that is until the JP Morgan Aviation & Transportation conference on March 22, 2007 where CEO Bill Zolliers spoke to analysts about the upcoming year. During that conversation, YRC made it clear that this year would be different for YRC, particularly in China, when he said the following:

  1. YRC will make 2 acquisitions in China this year. One will be in ground transportation, and the other network
  2. Their intention is to build an end to end solution for customers who are looking to export their manufactured goods from China to the U.S.
  3. They are not looking to service clients in the domestic China market
  4. This is the strategy is a result of customer pull

For listeners, these statements were quite candid, and I was a bit surprised when he spoke of the 2 acquisitions as it sounded like they were already in the bad (which we all know, nothing is in the bag until the money is in the bank).

I was also quite surprised by the fact that it was not their intention, stated intention at least, to get into the domestic distribution market. After all, they purchased one of the largest trucking companies that existed at the time, and with their largest client (Wal-Mart) expanding into new markets within China, I would have thought the JHJ acquisition would have been largely based on Wal-Mart given JHJ the chance at that business.

So, with the announcement that they are only going to focus on the export strategy, it would appear that their clients view their ability to manage the logistics of an U.S. inbound shipment as their core capability rather than their ability to manage freight inside the borders of China.

However, given what we have found previously, I would expect this to change. I would first expect YRC to get their export model up and running, and then leverage that to capture China domestic business, and I would expect their customers to also change their perspectives on YRC as they go from a successful U.S. logistics provider to a provider able to support China out bound moves… to a provider of domestic distribution services.

All in all, the market is still wide open, however as some firms act more aggressively and get their networks in place, the opportunities to capture Wal-Mart sized accounts will disappear.

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3 Responses to “YRC Has Plans For China”

  1. rbrubaker says:

    April 8th, 2007 at 11:42 pm

  2. rbrubaker says:

    April 29th, 2007 at 8:32 am

    Following up on the above article on YRC, it appears that YRC has had a bit of a rough call with an analyst over the last quarter’s earnings reports.

    Shares of YRC Worldwide Take Tumble details the call quite well, and in another article YRC stock declines after earnings news CEO Bill Zollars says that they have enough money for everything planned this year.

    Does he mean in China (i.e. to two acquisitions mentioned above) or…. enough for U.S.?

  3. YRC Makes a Move | All Roads Lead To China says:

    June 27th, 2007 at 10:00 am

    […] April 3, Bill Zolliers spoke to members of a JP Morgan audience about their plans in China (see YRC Has Plans For China) where he said that YRC was looking to make two acquisitions by year […]

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