Zollars is betting that bringing the two shippers under one roof will not only save money but also create new service possibilities. He says he already has pinpointed at least $45 million in cost cuts. Besides, says the 55-year-old industry veteran, Yellow has to get bigger to compete. With its highly paid Teamsters drivers, it has been losing business to nonunion truckers. Meantime, FedEx Corp. and United Parcel Service Inc. have been grabbing sales as they take on bigger shipments. Zollars recently spoke about his strategy with BusinessWeek Senior Correspondent Michael Arndt.History shows that most acquisitions don't pay off for the buyer. Why will this be different?
Most of those poor results of the past have come from slamming together two companies and trying to take out as much cost as fast as possible. We're not going to do that. We're going to continue to run each of these companies separately. The reality here is that we've got two companies with tremendous brand equity that have hundreds of thousands of loyal customers today, with very little customer overlap. It just makes a lot of sense to keep both of those brands in the marketplace and continue to invest in both of those brands.Then how do you make this deal pay off?
To make the deal add to earnings, we need only about $30 million in savings. We think we can take out $45 million to $125 million in costs in the first year just in back-office functions such as payroll, credit and collections, workers' compensation, and legal.
Then there are other operating synergies that really don't disrupt customer service. For example, we can combine purchasing of new trucks and trailers [for Yellow and Roadway]. Or, for another example, consider that today in Mexico, we each use separate partners to pick and deliver shipments. We could combine the volume there and eliminate one of the partners.Isn't there a risk that your two subsidiaries will end up competing against one another?
Sure, but other industries have dual-branding strategies, too. There are reasons people buy a Pontiac instead of a Buick even though both are made by GM. We could come up with a strategy that focuses one brand on one set of customers and the other on another. It could be that one of the brands migrates more toward a high-technology, value-added brand. The other one might be more of a low-cost provider. Our mantra for the first year is going to be 'no change for the customer, no change to basic operations.' We want to keep our service levels up and stay focused on the customer so there's no reason for them to change.What was wrong with continuing along the road you had been on?
Scale matters in our business. At the end of the day, you're going to have four or five major players in the ground-transportation business. We want to be sure that we're one of them. This deal makes us the No.3 ground-transportation provider in North America behind UPS and FedEx, and it puts us in a position where we're now the largest company in North America focused on bigger shipments.What are you seeing in the economy?
Starting in June, we've seen signs of recovery. About 70% of Yellow's customer base is in the manufacturing sector. In July, our tonnage was up about 10% over last year. And for the first time ever, July tonnage was bigger than June's. The August blackout cost us about $2 million in revenue. But all in all, that's just a blip. I don't think it's a significant impact on us or on the economy.