Tuesday, May 21, 2013

After refusing a YRC takeover, ABF and Teamsters agree on new contract

A negotiated Teamsters union contract will be voted on by ABF Freight’s 7,500 members throughout the month of June. Pending its approval, union members will accept an automatic 7% decrease in wages but will be recovered by the 5th year of the contract.  Union officials also granted the company flexibility to use non-union, outside carriers. According to ABF, this concession was needed because new business opportunities have been lost to non-union competitors.

A Teamster representative noted “Nobody ever wants to see a pay cut but in light of the company’s struggles and our desire to see the company survive, something needed to be done. It is in our best interests, as well as ABF’s that this company is given a chance to climb out of this deep recession so that our members’ futures are protected”.

Indeed it appears troubles at ABF resulted in a rebuffed buyout opportunity from YRC in April while in the midst of contract negotiations with the Teamsters.  According to Mr. Welch, CEO of YRC, “We saw this as an opportunity to improve the density at YRC Freight. Our network has the capacity to handle more shipments. I think an acquisition makes sense.” Welch also said the attempted acquisition speaks to the financial strength of YRC. He said the company would have been able to secure the financing if the two firms had pursued the deal. An interesting statement from a company, that not too long ago, teetered on the brink of financial disaster and has quite a bit of debt on its books.  Not too surprising, the Teamsters Union which has a financial stake in YRC including a seat on the company’s board of directors, was none too pleased with a possible merger. Teamsters President, James Hoffa said “Before YRC begins looking for acquisition targets they should first restore our members’ wages and pension contributions. We have seen this kind of arrogance from YRC before. We thought they had finally learned the lessons of past management catastrophes. Unfortunately it appears they have not.”

YRC, itself, just recently received approval from the Teamsters to undergo its network optimization plan which calls for consolidating 29 terminals into existing terminals and closing three distribution centers, along with several other changes to YRC’s network.

Meanwhile, ABF’s lawsuit with YRC continues. Arkansas Best alleges that wage deals between the Teamsters and YRC violated the National Master Freight Agreement (NMFA). The NMFA, implemented in 2008, was designed to create equal labor costs and other benefit payments among trucking companies with drivers represented by the Teamsters.

The lawsuit, first filed in 2010, was dismissed a second time by the U.S. District Court. In late 2012, Arkansas Best appealed the case again to the United States Court of Appeals. The Circuit has once appealed in favor of Arkansas Best.

So, as a lawsuit hangs over YRC and ABF as well as both work towards profitability, non-union less-than-truckload (LTL) companies such as Old Dominion are  taking market share, increasing tonnage and posting record financial results.

The trucking industry is adapting to the current environment where flexibility is vital and as such unions find themselves having to adapt as well. For how long unions will be receptive to this need remains to be seen but in order for them to survive as well, flexibility is just as important.