Past-Forward 3By Larry Dignan | Posted 2003-08-01 Email Print
Re-Thinking HR: What Every CIO Needs to Know About Tomorrow's Workforce REGISTER >
Roadway gets hitched to Yellow Corp.
Trucking company Roadway Express has committed itself to analyzing everything from the size, number and content of shipments, to each step in moving a pallet of toasters from factory, to truck, to retailer, and the time each step takes (Case 041, "Unloading On The Competition," Oct. 2002). Last month, Roadway was busy analyzing an offer from rival Yellow Corp. The two companies pulled the trigger on a $966 million deal, excluding Roadway debt. Yellow paid a 60% premium for Roadway, according to Wall Street analysts.
With the acquisition, you'd think Yellow's plan would look something like this: use Roadway's technology infrastructure to become a lean and mean trucking giant and close duplicate facilities.
But Yellow says it will integrate Roadway in the slow lane, keeping it largely independent. The companies say back-office functions will be integrated, but duplicate hubs and terminals will remain separate. Eventually, Yellow plans to leverage "service capabilities and technologies" for annual cost savings of $45 million by the end of the second year. In five years, they should be able to save more than $125 million, the companies said.
But Wall Street analysts question Yellow's integration plans. Davenport & Co. analyst Mark Levin said in a report that Yellow's structure keeps the companies separate entities. Ultimately, Yellow's plan could spark intracompany competition and postpone cost savings. "These decisions seem illogical to us," says Levin.