Modest progress reported in ABF, Teamster contract talks

Mark B. Solomon
DC Velocity
March 04, 2013

The Teamsters union said late Friday it has made modest progress in contract talks with less-than-truckload (LTL) carrier ABF Freight Systems but cautioned the company "needs to get realistic" on the core issues, especially with less than a month to go before the current contract expires.

During scheduled negotiations last week in Kansas City, ABF withdrew its initial proposal and agreed to bargain from the existing contract, the union said in a statement Friday. Neither side would divulge the specifics of the carrier's original proposal. In a mid-January statement, the Teamsters said ABF sought increased use of part-timers and subcontractors and demanded reduced vacations and less time off for holidays, among other things.

Talks will resume next week. The contract covers about 7,500 ABF workers.

Gordon Sweeton, who heads the union's freight division and is lead negotiator in the talks, called ABF's move to bargain from language in the current pact a "step in the right direction." However, Sweeton said that with the contract expiring March 31, more work needs to be done to resolve the main differences between the two sides. He did not elaborate.

Fort Smith, Ark.-based ABF, a unit of Arkansas Best Corp., has, for the most part, kept mum during the negotiating process. In late December, however, the company went public with a warning that it would need to make "extensive changes" to its network if it couldn't lower costs and increase flexibility through a new labor agreement with the Teamsters union. Those changes could include shutting a number of terminals and distribution centers, ABF said. As of mid-2012, the carrier operated 265 terminals nationwide.

ABF has lost approximately $230 million since 2009. Part of the red ink stems from the impact of the recession and the destructive rate wars that ensued among LTL carriers in a failed effort to drive the struggling YRC Worldwide Inc., then the nation's leading LTL carrier, out of business. Part of it also stems from not only having the LTL industry's highest-paid workers but also lacking the network density needed to support a high-cost infrastructure.

Satish Jindel, founder and president of SJ Consulting, said in a letter to DC VELOCITY that ABF's inefficient terminal network is a key factor behind its problems. ABF handles 70 shipments per terminal each day. In comparison, rivals Con-way Freight, the LTL division of Con-way Inc., handles 270; FedEx Freight, FedEx Corp.'s LTL unit, handles 220; and Old Dominion Freight Line Inc. handles 130, according to Jindel.

Jindel, who has been critical of ABF's operational structure, said the company has been slow to react to changes in its customers' shipping patterns. Since 2007, ABF has closed less than 5 percent of its locations but has seen a 12-percent drop in volumes. In contrast, Con-way shuttered 17 percent of its terminals over that time, while FedEx Freight closed about 100 terminals.

In addition, ABF's fourth-quarter daily shipment count dropped 2.5 percent year-over-year, while UPS Freight, UPS Inc.'s LTL arm, and FedEx Freight posted gains, according to Jindel.

ABF is considered one of the best freight-handling companies in transportation. It is often used by businesses to ship hard-to-handle freight that other truckers won't touch. In fact, ABF is vocal about its skill in that area. It generates $374 in revenue per shipment, higher than any LTL carrier.

However, those shipments are very time- and labor-intensive to transport and don't generate the network velocity and density the company needs to support its operations, Jindel said.

In the letter, the consultant questioned why the Teamsters should give concessions to a company that "operates an inefficient network, lacks density, and has failed to increase sales when competitors have made significant progress in all those areas over [the] last few years."


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