As the proposed $966-million merger of Yellow and Roadway plays out, the action will be closely watched by everyone, especially shippers.

The obvious issue for shippers is that with each consolidation — or outright demise, as in the case of Consolidated Freightways — competition diminishes and prices can expect to rise. Although a weak economy will keep prices in check for the short term, shippers worry about the long-term effect of fewer LTLs vying for their cargo.

Peter Gatti, acting president of The National Industrial Transportation League, says his members are concerned about the Yellow-Roadway merger. “Consolidation may limit service options, limit availability.” He also worries that the merger could be the leading edge of additional mergers. “We could see a new round of consolidations which could affect pricing,” he says.

On the day of the announcement, Gatti began talking to members and will continue to survey them in the months ahead to see what action, if any, they want the group to pursue. Under the 1976 Hart-Scott-Rodino Act, the merger will probably be subject to review for antitrust by the Federal Trade Commission which then begins a 30-day review period. During this interval, stakeholders can voice their fears publicly.

Antitrust issues could be a moot point if Yellow CEO Bill Zollars makes good on his promise not to shrink the company but maintain its current size, except for the melding of some back-office costs such as accounting and insurance. He has promised not to compress the network by closing terminals and laying off workers. “Our bottom line is that we're looking to grow the company, not shrink it,” he said during the merger announcement.

Terri Fiskars, operations manager, Logistics Fiskars Brands, and NASSTRAC president, supports the merger but is guarded. “I understand that the combined parent company does not plan to merge the two operating companies, although some rationalization seems likely.” She added: “Increased efficiency will be welcomed by shippers. Competition in the industry is likely to restrain rate increases, and we will monitor the rate and service impacts of this deal closely.”

Wall Street analysts are showing some suspicion, too, saying that the back-office consolidations would amount to less than 1% of revenues. “Why go through all of this for that small amount?” said one analyst of the combined company's estimated $6.6 billion in revenue. Zollars said the new company will save $45 million by the end of the merged company's second year. The combined entity will garner about 20-25% of the LTL industry.

“The purchase price was somewhat surprising,” admits Jim Corridore, Transportation Industry Analyst at Standard & Poor's. “But you have to realize that Yellow is only paying one-half times sales.”

One plus for the combined carrier is that it will give each company entree into markets they currently lack. Yellow has traditionally been stronger in the industrial segment, while Roadway has been more involved in retail sectors.

If Yellow keeps current staffing and network levels as they are, it will be good news for shippers, as well as 35,000 union workers concerned about their jobs. A day after the announced merger, Teamster president Jim Hoffa and other union officers met with the CEOs of both companies. Union leaders left the meeting baffled by the promise that both companies will be operated separately. “There appears to be no apparent economic value without reducing operations or a significant rebound in the economy,” a union official said. Hoffa added: “This proposed merger raises many questions.”