On July 1, 2020 the U.S. Department of the Treasury announced that it was providing YRC Worldwide with a two-tranche loan that would allow it to make delinquent health and welfare and pension payments as well as fund capital expenditures for its tractors and trailers. As part of the deal, YRC is required to issue the Treasury Department shares of common stock, which YRC expects will equate to a 29.6% equity stake in the company.

The press release stated that “YRC is a leading provider of critical military transportation and other hauling services to the U.S. government and provides 68% of less-than-truckload services to the Department of Defense. This loan will enable YRC to maintain approximately 30,000 trucking jobs and continue to support essential military supply chain operations and the transport of industrial, commercial, and retail goods to more than 200,000 corporate customers across North America.”

It is noteworthy that this is the first time the U.S government has taken a large stake in a company seeking a bailout in the wake of the coronavirus pandemic. It is also the first loan announced from the $17 billion relief fund created by U.S. lawmakers to help "businesses critical to maintaining national security."

To make sense of this bailout, it is worth taking a trip back in history. In the early 2000s there were three large unionized LTL carriers, Consolidated Freightways, Roadway Corporation and Yellow Freight System. Back in 2002, Consolidated Freightways Corp., America's third-largest trucker laid off about 15,500 workers, shut down its operations and filed for bankruptcy.

In my previous blog (https://www.dantranscon.com/index.php/blog/entry/economic-recovery-and-the-future-of-the-freight-transportation-industry-part-1), I suggested that the economic recovery during the balance of this year will likely have a number of peaks and valleys that reflect the spread of Covid-19. In this blog I will explore some of Covid-19’s impacts on freight transportation.

The latest economic data “most closely resembles a horror movie with Q1 GDP posting the worst numbers since the global financial crisis, nearly a quarter of workers now unemployed, and durable goods showing the worst two-month streak since data collection began,” stated Brett F. Ewing, Chief Market Strategist, First Franklin Financial Services.  The job market halted its pandemic-induced collapse in May as employers brought back millions of workers and the unemployment rate unexpectedly declined. Tens of millions of American workers are still out of work, and the unemployment rate, which fell to 13.3 percent from 14.7 percent in April, remains worse than in any previous postwar recession. All the same, economists warn that it will take far longer for the economy to climb out of the hole than it did to fall into it.

The gains in May indicated that the Canada Revenue Agency, the U.S. Congress and the Federal Reserve had at least partly succeeded in limiting permanent economic damage by providing trillions of dollars in assistance to households and businesses. But that aid is now in jeopardy in the U.S., and economists warned that there was no guarantee the job market would continue to improve without it.

Even as the economy shows signs of revival, the United States is confirming more than 20,000 new coronavirus cases and 1000 deaths a day, with counts rising in at least 21 states. The protests over the past three weeks have brought thousands of people to the streets across North America, most close to one another. While many protestors are wearing masks, the lack of physical distancing will likely produce increased virus case counts in many locations.

The recovery of the North American transportation industry is contingent upon the revival of the economies of the United States and Canada. The movement of auto parts, housing supplies, manufactured goods, food stuffs. and a host of other products drive the economy. If there are any impediments to the smooth operation of North American supply chains, this has a direct impact on the Transportation industry. This blog will focus on the forces shaping the revival of the two economies. Part 2 will focus on what the freight transportation industry will look like after the recovery.

Since the beginning of the Covid-19 crisis, Canada has lost about 3 million jobs while the U.S. has lost about 40 million jobs. Many of the unemployed have been forced to stay at home due to the contagious nature of the virus. For the past week, the United States has also been rocked by protests in over 75 major cities because of the killing in Minneapolis, Minnesota of an African American man, George Floyd, by a white police officer.

Most U.S. states and Canadian provinces are in “the restart” period. With no vaccine for probably nine months or more, companies need to generate revenue and profits during the “next normal” phase. Businesses and consumers are having to learn to adapt to the public health guidelines in each jurisdiction (i.e. social distancing, handwashing, mask wearing, drive to work rather than take public transportation etc.) and the new operating procedures (i.e. curbside pickup, controlled entry to stores and businesses, working from home etc.).

In the space of a few months, we have discovered that jobs that no one thought could be done remotely can be handled very effectively with a laptop computer and video conferencing. Cash-strapped businesses are learning that they can cut costs through the reduction or elimination of office space and its attendant costs. Teleconferencing reduces the need for business travel, another cost saver. Commuting costs can be cut – a walk to the home office beats hours in a car or on public transit. Of course, not everyone can work from home.

The Covid-19 pandemic is much more than a major health crisis that has produced massive business closures and job losses. It represents a “change agent” that will likely produce a range of impacts in Health Care, Education, Technology and in the world of Business. Some of these changes may be temporary but many of them will be permanent; they will remain long after a vaccine is found. Here are some examples of the changes taking place.

A recent study by Jonathan Dingel and Brent Neiman of the University of Chicago found that 37 percent of jobs in the U.S. can be performed from home. Webex, GoToMeetings, Microsoft Teams, Face Time and Zoom video conference calls are now a regular part of every day. While these services were in widespread use pre-Covid, they are being increasingly used by businesses, schools, churches, associations, and other organizations. Working from home has certain disadvantages (i.e. distractions, noise levels, inability to arrange impromptu face-to-face meetings with coworkers etc.) but it has certain inherent significant benefits (reduced travel time, fuel consumption and carbon emissions) that should provide many citizens with a better quality of life.

Just as important as the social and technological changes being driven by the pandemic are the changes taking place in the operations of specific business segments. Some industries (i.e. restaurants, travel, hospitality etc.) are being transformed as new processes and procedures are put in place to protect consumers and employees.

For example, restaurants are rearranging tables so their customers sit six feet apart, they are erecting plexiglass dividers to limit the exchange of potentially harmful respiratory droplets between patrons, or between patrons and employees, creating disposable menus, and ensuring their employees wear masks, gloves and other protective equipment. Similarly, airlines are making changes to their processes by performing temperature checks before passengers enter a departure gate, leaving the middle seats vacant on their flights and by more frequently sanitizing their planes.

As of May 2, 32 U.S. states and 5 Canadian provinces (https://nationalpost.com/news/canada/reopening-canada-provinces-ontario-quebec-saskatchewan-alberta) have announced plans to reopen businesses on a phased basis. Each state and province has developed back to work guidelines to manage the process. These actions are being taken even though Covid-19 is a very contagious virus with 1.1 million reported cases and 65,000 deaths in the US and 55,000 cases and almost 3400 deaths in Canada. Currently there is no cure and a cure is at least a year or more away.

Government Health Care Guidelines

While there are various sets of guidelines that have been published, those developed by New York State and by the Province of Ontario (https://www.ontario.ca/page/resources-prevent-covid-19-workplace?_ga=2.258615434.1461890914.1588269926-1610310933.1584035138 ) are particularly thoughtful and will be referred to in this blog. The NY state document stipulates that to open their economy, hospital and ICU capacity should not exceed 70%. Moreover, the rate of transmissions should be less than 1.1 (i.e. one person infects less than 1.1 people). Adhering to these guidelines will limit the possibility of hospitals being overwhelmed by a surge of new cases. The CDC (Centre for Disease Control) in the United States suggests that there should be a 14-day decline in Covid-19 hospitalizations immediately preceding the lifting of restrictions. Should the number of infections begin to escalate, restrictions should be put back in place. Note that some states are lifting restrictions while infections are rising.

The NY state plan stipulates that a testing regimen should be activated with a daily objective of 30 tests per 1000 people. There should also be a satisfactory number of testing sites in each location; there should be an immediate turnaround on testing results to limit the spread. New York State suggests that an advertising program be created to educate the public about the need and the process of being tested.