Thursday, July 23, 2020

How A Truck Company Got $700 Million In A Day

Edward Dzialo 7/23/2020

With 2020 still unfolding, we are still seeing a lot of the unintended consequences and results of COVID-19. Beyond the direct effects of the virus, there have been several indirect ones that are still filtering through. There have been both tax changes and extensions due to the CARES Act and COVID-19, respectfully. 

Both of which are having an impact on the trucking industry. 

The Story

One such strange reverberation of our times is a story that involves Congress, COVID-19, and a truck company.

At the beginning of the month, we discussed how the U.S. Treasury loaned $700 million to a trucking firm called YRC Worldwide. One of the many strange things about this deal was that the government, in exchange for the loan, took ownership of 29.6% of the company. 

When this was announced, there were several questions regarding the nature of the loan. YRC, was only worth a tenth of the amount of money that was loaned to them. Over the four years before the loan, the company’s stock had dropped by 85%. 

To add to this, YRC was sued by the U.S. government (the people who are now loaning them money), for misrepresenting the weight of their shipments and costing American taxpayers millions. 

The Result

At SPAN Enterprises, we’ve embraced our place within the trucking industry—it is one of support. So when stories like these appear, we’re empathetic to the truckers who, like most of the world, are struggling, during the uncertain times of COVID-19. It was reported by CNN that there have been more confirmed cases of COVID-19 in the last two weeks than in all of June. The Hill said that last week's jobless claims rose to 1.4 million, which had been the biggest increase since March. 

Despite the hope that things would return to normal, they have not. For the truckers who have been expected to keep running to supply and feed while living within an economic downturn, we feel for them. 

Congress does too. An oversight committee made up of both Republicans and Democrats are questioning this loan. The reason YRC received it was due to what they were transporting because it was linked to national security. 

One of the concerns that the oversight committee has is that the loan is expected to lose money. As mentioned earlier, YRC’s stock had fallen drastically and their ability to thrive financially in the wake of the loan has come into question.

The committee reviewing this loan noted how close YRC was to being bankrupt. The interest rate on the loan is low when compared to the amount of risk to the lender—you.

If interest rates are to be based on pre-coronavirus conditions, which they are, then how did this one trucking firm in Kansas get a $700 million loan with a relatively low-interest rate?

What’s Next

The oversight committee's position is that the loans going out, including the one we have gone over, may not doing what they were intended for—to give aid to the vital organizations within our economy. 

Because of our proximity to truckers and to the industry, it’s difficult to see their hard work not being recognized. In 2018, the trucking industry had the two best quarters in the history of trucking. 

By 2019, Business Insider referred to the industry as a “bloodbath.” And now, the president at ACT Research, which studies the commercial vehicle industry, said, “...2020 is going to be a very, very tough year.” Both freight and contracts are down. 

Though this story is developing, there is some assurance that the trucking industry is being watched at the national level. 

The trucking industry is not immune to financial difficulties, but there is money to protect businesses for the sake of our economic future. Trucking is a major part of that.

As a trucker, you’ll need to file your Form 2290 by the end of August. Make it simple on yourself and try ExpressTruckTax. It might be the easiest thing you’ll do in 2020. 

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