When was the last time you worked for a US government-owned trucking company? If you don’t remember ever being employed by the government, don’t worry. The idea of US-owned trucking is completely unprecedented. The federal government has never owned stake in a trucking company… until now.
Why Did the US Government Enter the Trucking Business?
As of June 1st, the United States owns a stake in YRC Worldwide. The deal, made by the U.S. Treasury, issued a $700 million loan to the trucking company in exchange for a 29.6% ownership of the firm.
The US government does not usually take an ownership in companies. Even at the height of the economic crash of 2008 when the government could have justifiably taken a portion of the financial institutions that caused the mess, the US government still declined ownership as part of the bailout.
This time, however, Congress opted to make an exception for YRC Worldwide because the company is responsible for shipping military equipment.
The funds used for this loan came from the $500 billion CARES act passed in March. During the development phase, senators set aside $17 billion specifically to ensure that establishments responsible for maintaining national security would be financially-funded.
According to Steven Mnuchin, United States Secretary, “This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers.”
Details About YRC Worldwide
YRC Worldwide is a trucking company founded in 1929. Since then, YRC has grown into what is considered to be one of the largest freight transporters by land in America, employing about 28,000 people. Fleetwise, YRC appears to have over 7,500 semis and 30,000 trailers.
Limits of the Loan
To ensure the loan is used appropriately to provide relief from COVID-19 related effects, limits are supposed to be in place to restrict executive-related payouts, such as compensation and dividend payments.
Unfortunately, the Treasury has neglected to provide the specifics of these regulations to the public.From a taxpayers’ standpoint, the deal raises a few other troubling questions. For example, when the deal was passed, YRC was only worth $70 million.
Another concerning issue revolves around a previous lawsuit the Department of Defense filed against the trucking company. According to the claim, YRC Worldwide has consistently overcharged the agency for the past seven years.
DoD claimed in the lawsuit that the trucking company implemented lengthy delays when requested reweighs were lighter than originally reported. When CNN asked YRC about the topic, they noted that “A motion for dismissal has been pending for 10 months” and that “There has been no impact on the Department of Defense relationship.”
That said, if YRC Worldwide adheres to payment schedules the loan will mature, or be paid off, by 2024.
With trucking being an essential component of the US economy, could the federal government see more of an opportunity to take a future stake in trucking? Or will this be a one-time deal?