Arkansas Best's Incoming CEO, Judy McReynolds, Treads Her Own Path to the Top

by Jan Cottingham  on Monday, Nov. 2, 2009 12:00 am  

Judy McReynolds is set to become the only female CEO of an Arkansas-based publicly traded company on Jan. 1.

The economic downturn has given her a lot to look at and manage.

Although the national recession officially began in December 2007, according to the National Bureau of Economic Research, the trucking industry started seeing trouble in late 2006. ABF's tonnage slipped in the fourth quarter. Arkansas Best's income fell 20 percent that year compared with 2005.

The company wasn't alone.

"In October and continuing into November [of 2006], traditionally among the busiest months of the year, ABF experienced a sudden and dramatic reduction in business that mirrored conditions throughout the trucking industry," Davidson said at the time. "This year's sequential decline in total weight per day from September to October was the largest, by far, in over 20 years."

The trucking sector is notoriously sensitive to the state of the economy. When demand for goods - consumer, construction, manufacturing - dries up, so does tonnage. Revenue falls as does profit.

From October 2008 through September 2009, Arkansas Best experienced four consecutive down quarters, posting a $50 million loss on revenue of $1.5 billion. It cut 1,100 jobs in the fourth quarter of 2008 alone and reported 350 more layoffs in January. It has reduced fleet size, closed facilities and frozen wages for nonunion workers. Last year, McReynolds saw her own pay cut to $418,578 from $640,021 in 2007.

McReynolds' experience at Ernst & Young and P.A.M. taught her the cyclical nature of the trucking sector.

"This industry is very impacted by economic cycles," she says. "You have great prosperity when things are good, and when things are in a down cycle, you can have some very serious constraints on companies."

 

How to Deal

For ABF, one of those constraints is labor costs, which in 2008 accounted for about 60 percent of its revenue. It's hard to increase customers' prices during a recession so companies look to cut costs. But about 75 percent of ABF's employees are covered under a five-year contract with the International Brotherhood of Teamsters, ratified in 2008.

ABF has "a cost structure that's higher than other companies," McReynolds says, and it can't unilaterally decide to trim wages and benefits, including pension funding. That means it can't be as nimble as its nonunion competitors.

 

 

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