The U.S. trucking industry grew in the years following World War I. Nonetheless, the industry was still in its early days, and railroads were the primary method of transportation for goods from point of manufacture to point of sale.
This did not deter brothers Carroll and Galen Roush, who founded Roadway Express in Akron, Ohio in 1930. Roadway Express entered the trucking industry as a less-than-truckload (LTL) carrier; its first load was transporting tires between Akron and St. Louis.
The company was founded with 10 owner-operators. Roadway saw immediate success and soon shipments were moving to Chicago, Houston and Kansas City. Success continued, and within a few months the company opened terminals in Atlanta, Baltimore, Birmingham, Charlotte, Indianapolis, New York, Philadelphia and Knoxville, Memphis and Nashville, Tennessee. The company’s expansion from its Midwest base was a result of the expanding trucking industry, which was challenging the railroads and hauling increasing amounts of freight.
The nation’s railroads had been regulated since 1887 by the Interstate Commerce Commission (ICC). As the Great Depression wore on and railroads lost freight market share to the trucking industry, the railroads’ executives began seeking a similar regulatory environment for the trucking industry.
This led to passage of the Motor Carrier Act by Congress in 1935. Under the terms of the legislation, the right to operate in interstate commerce was granted to those carriers already operating and to new trucking companies that could prove “necessity and convenience.” Like the railroads, the trucking industry came under the regulatory oversight of the ICC. It would oversee the rates charged by interstate trucking companies, and restricted the routes existing and new trucking companies could operate.
Operating in a newly regulated environment brought challenges. However, Galen Roush, who was a lawyer, thought the regulated business climate could be advantageous to Roadway. He had kept detailed records of Roadway’s shipments and used them as the basis for rights to a number of lucrative routes the company had previously run. While it took 16 years of legal battles with the ICC, Roadway Express retained rights to some of the most lucrative transportation routes. Moreover, the ICC’s regulations stopped other companies from hauling freight on these routes without paying. Regulation limited competition, while also raising the status of the trucking industry to the equivalent of a public utility. These factors helped Roadway Express to remain profitable for many years.
World War II and expansion postwar
In the early 1940s the U.S. railroad freight inventory became more and more defense/war-related. This intensified when the nation was pulled into World War II by the Japanese sneak attack on Hawaii. Demand for truck transportation grew to handle both goods that the railroads no longer had room for, as well as war materiel produced.
With the U.S. entry into the war, manufacturing plants of all kinds were retooled to produce the weapons of war. In particular, and beginning almost immediately, railroad, truck and auto manufacturers converted to build tanks, jeeps, airplanes, etc. This meant the existing inventory of trucks had to be used past their normal lifetimes, and repairs deferred as much as possible.
As the war ended, Roadway Express began replacing owner-operators with employees to drive its fleet. Concurrently trucking took more market share from the railroads. By 1950 the ratio of truck to train ton-miles was 20%, which was double that of 1948. Therefore, Roadway began to spotlight its LTL service in the early 1950s. The price the company charged per pound shipped was sometimes three or more times the cost of a full load. In addition, the flexibility of the service improved the chances of a return load.
Business boomed as the 1950s progressed, and Roadway needed to establish a broader terminal network. Since the company’s founding the Roush brothers had recognized the significance of hiring good managers, as well as instituting tight financial controls. Roadway was conservatively run, and kept a very low profile. It maintained this approach for decades.
The company’s excellent financial record and growing business helped Galen Roush convince Chase Manhattan Bank to loan Roadway millions of dollars for expansion. By 1956 Roadway’s fleet and terminal expansion program had been successful enough that the company no longer used any owner-operators.
However, friction between the brothers made managing the company together difficult. In 1956 Carroll Roush, the younger of the two brothers, decided to sell his part of Roadway. In a move designed to annoy his brother, Carroll sold his shares to the public for about $5 million. After he severed ties with Roadway, Carroll purchased ONC Fast Freight (which later became a part of ROCOR International).
The 1960s: expansion, cost controls and bonuses
Between 1958 and 1968, the number of Roadway Express terminals more than doubled – from 60 terminals to 135. Concurrently, the company’s management installed very sophisticated accounting procedures. Roadway Express was able to identify profit and loss by route, commodity, weight bracket and individual customer. Although it was expanding rapidly at that time, the company was able to focus on its profitable business and routes and control costs at the same time. Roadway continued its focus on LTL shipments and was able to generate higher profit margins. In addition, each terminal was run as a separate profit-and-loss center; hard-charging managers were able to earn significant bonuses.
By the 1970s Roadway paid off the loans it had taken out previously while many of its competitors were still in debt. When the 1974-75 recession occurred, its financial strength helped Roadway maintain its leading industry position despite the economic downturn.
At the same time, the company’s footprint grew to 40 states in the early 1970s and in 1977 Roadway operated in all 48 of the contiguous states.
Deregulation changes the industry in the 1980s
Along with the airline and railroad industries, interstate trucking was deregulated in 1980. A classic good news/bad news situation, deregulation provided Roadway Express with opportunities to expand into new areas of business, but at the same time, the company faced challenges from new and old competitors.
In the LTL market, discounting of prices caused many companies’ margins to erode and others to fail because of the competitive environment. From 1980 to 1982 Roadway marketed itself as a premium service carrier with the best geographic coverage and kept its high-price model. However, by 1982, its revenue had fallen significantly, and Roadway had slipped behind Yellow Freight and Consolidated Freightways in market share. The company began to discount its services. For the first time in its history, Roadway launched an advertising campaign to promote itself and its services.
In addition, the company changed its corporate structure. Roadway Services Inc. (RSI), a holding company, was created in 1982 and Roadway Express was its primary subsidiary. In addition, Roadway Services made a number of acquisitions over the next two years, including Spartan Express Inc., Nationwide Carriers, Inc., and Roberts Express.
Spartan Express operated as a short-haul carrier in the South. It handled shipments with 24- and 48-hour service requirements. Nationwide Carriers specialized in irregular route truckload shipments across the continental U.S. in all three modes – dry van, refrigerated vans and flatbeds. Roberts Express specialized in critical or fragile shipments needing special handling or speedy delivery.
In 1985 RSI’s earnings slipped for the first time in 32 years. The chief reasons were the conversion of the Roadway Express fleet to twin trailers and the start-up costs of Roadway Package System (RPS). This new subsidiary was established to compete with UPS in the small-package surface delivery business.
By 1988 RPS had 130 terminals and covered 70% of the U.S. It also began to generate profits. RSI and Roadway Express continued to make acquisitions throughout the late 1980s, including Viking Freight, the largest regional carrier in the western U.S. However, RSI shut down Nationwide Carriers in 1989 because it was unable to generate a profit.
International expansion and mixed results in the 1990s
RSI expanded into Mexico and Europe in 1990, as well as expanded its reach in Canada. But while the company increased revenues, several of its subsidiaries experienced challenges. Because it was unprofitable, Spartan Express was absorbed by Viking Express in 1990. VFS Transportation, another Viking Express subsidiary, was closed the same year. Railroads and air cargo companies became more competitive with the trucking industry, and market share became more costly. At the same time the LTL market’s margins were being squeezed because too many companies were chasing the same freight.
Roadway was still in a tight competition with Yellow Freight and Consolidated Freightways. Roadway continued to expand and started to offer services to 20 countries in Europe in 1991. It then began to offer export services to 24 Pacific Rim ports.
Labor issues lead to a spin-off
Roadway Express was the only Roadway Services, Inc. subsidiary that was unionized. It paid about 30% more to its employees who were members of the International Brotherhood of Teamsters than other RSI companies paid comparable employees.
A strike by Teamsters members in 1994 lasted 24 days and the result was a $68 million loss that quarter at Roadway Express. This also led Roadway Systems to spin Roadway Express off as a separate company in August 1995. RSI was renamed Caliber Systems Inc., and left its Akron headquarters. Its remaining companies were Roadway Package System, Roadway Global Air, Roberts Express and Viking Freight.
Roadway Express became an independent, debt-free company, with revenues of about $2.2 billion. It was listed on the NASDAQ and it had a customer base of about 500,000 worldwide. Although analysts speculated that Roadway Express might fail as an independent company, management cut costs, and in its first year of business as a stand-alone company, it generated $21.8 million in profits.
An independent company
Under CEO Michael Wickham, newly independent Roadway Express had taken measures to cut costs. More than 100 shipping terminals were closed; administrative costs were shaved by dividing its operations into four regional units instead of five. Perhaps most importantly, Wickham met with the Teamsters with a detailed plan for cooperation between the union and the company that would keep it competitive with non-union companies. Wickham kept costs down but did not ask for monetary concessions from the union. A key result was an extremely loyal workforce. Turnover at Roadway Express was less than 3%; its competitors often had turnover of nearly 100%. Roadway saved money not having to constantly recruit and train new employees.
In 1997 Roadway acquired Reimer Express Lines, a Canadian trucking firm, for $15 million. It also expanded its presence in Asia by launching Asian Roadway Express, and it introduced a new computerized tracking system that gave its agents faster access to shipping information. Roadway signed a five-year contract with the Teamsters in April 1998. While the contract gave the union members a small wage and benefit increase, its length of contract was meant to create a period of stability for the company and its unionized workforce.
Roadway Express is acquired
In December 2003 Yellow Corp. acquired Roadway Corp. (Roadway Express and Reimer Express Lines) for $1.05 billion. Yellow Corp. formed Yellow Roadway Corporation, its largest subsidiary. Back-office and duplicative functions were combined, but the three companies retained separate marketplace identities.
In 2009, the companies were combined as YRC Inc. On February 1, 2012, the name of YRC Inc., was changed to YRC Freight.