June 18, 2007: By John Gallagher, for Traffic World - Pension benefits are in play as never before in the current round of negotiations between UPS and the International Brotherhood of Teamsters, and the future of LTL giants YRC Worldwide and Arkansas Best - as well as UPS's own freight division - may hang in the balance.
When the $48 billion parcel giant inked its last deal for 230,000 union drivers in 2002, it had hoped to be able to celebrate its 100th anniversary this year without the diversion of contract negotiations.
But now both sides are hoping to lock in a new contract as early as the end of the summer, according to industry sources, and avoid anything close to the 14-day strike in 1997 that threw a massive wrench into the trucking market as shippers scrambled to find capacity and rival carriers were deluged with diverted freight.
UPS is adamant that the parcel contract, which expires July 31, 2008, is being negotiated at the same time but separate from a new contract being created for UPS Freight covering 125 employees in Indianapolis, a terminal where workers voted to organize. However, some believe one UPS unit is being used as leverage against the other.
"There's going to be some sort of a trade-off involved with UPS Freight, absolutely," said Jason Seidl, an analyst with Credit Suisse. "Exactly what form that may take, who knows. But I think it's a chip that UPS management can use to help negotiate part of the (parcel) contract, whether it's related to working conditions, salary, or the pension fund."
The early start to negotiations this year has reduced the risk of a work stoppage, but hasn't kept rival carriers and their customers from drawing up contingency plans. UPS moves 15.6 million packages through its system each day, with 13.8 million flowing over the roads, on the rails and through the air of its domestic shipping network.
"(During the strike) in 1997, we got a huge surge of freight - but then again a lot of carriers did," said Con-way spokesman Gary Frantz. "Back then, people were unsure whether UPS could handle the strike. We''re more confident this time around."
While both sides took credit for a "win" in 2002, the labor landscape may have changed enough over the last five years to put UPS management more firmly in the driver''s seat in 2007.
"If you look at other unionized companies like the airlines and the auto industry, they've either downsized, gone through layoffs or renegotiated their contracts over the last five years," said Satish Jindel, a principal with SJ Consulting Group.
"Wages in the airline industry are easily 20 percent lower. While it''s desirable for unions to have decent wages for decent work, they have to recognize that a lot of people are working for less. So for them to push the cost structure of UPS higher, it could undermine the goal of protecting or growing their jobs."
Jindel also noted that besides rival FedEx - the largest express carrier shippers could turn to in 2002 in the event of a snag in negotiations - there was Airborne Express. "Now there''s DHL, and Airborne didn't have the global network that DHL has, or the access to capital that DHL has," he said. "As a result, if there''s a delay in contract execution, and shippers start to move business away, the company will be at risk of seeing that business go away permanently."
The basic matters of wages and work rules are taking a back seat so far to the longer term issues surrounding pension funds in the current round of negotiations, which kicked off in Detroit last September.
Agreeing to place multiemployer pension funds on the negotiating table is evidence, say some industry observers, that Teamsters President James P. Hoffa acknowledges his union may not be playing with as strong a hand as in previous years.
The largest of the Teamster multiemployer pensions, the Central States Southeast and Southwest Areas Pension Fund (commonly called Central States), was only 49 percent funded at the end of 2005, with roughly $21 billion in assets as of the first quarter 2007.
Because an estimated 60 cents of every dollar that UPS contributes to the pension fund cover the retirement benefits of non-UPS employees, the company has proposed - according to the Teamsters - paying a lump sum withdrawal liability owed to the Central States pension fund, an amount subject to negotiation between UPS and the pension plan.
Retirement benefits would thereafter be administered by a new joint Teamsters-company pension plan with an equal number of Teamster-appointed and UPS-appointed trustees.
"I can assure you that the negotiating committee will not consider any plan that jeopardizes the benefits of members in Central States or members of any other Teamster fund," said Ken Hall, director of the Teamsters Parcel and Small Package Division and co-chairman of the UPS national negotiating committee.
"The company's proposal is not a negotiating tactic. It is a serious proposal that must be seriously evaluated and compared with the other options available for improving and protecting the pension benefits of our members."
But not all Teamsters agree that management is holding the best cards. Teamsters for a Democratic Union, a grassroots group based in Detroit, believes the Teamsters are still reaping the fruits of a "very successful strike" in 1997. "That still gives us added bargaining power as a union," said TDU national organizer Ken Paff. "We're saying to the union leadership, use some of that power to drive the company demands off the table and put the union demands on the table."
According to TDU, some of those demands should include adding 15,000 new full-time jobs, wage increases and better health care benefits.
"The union could tell the company that if they want early ratification, they have to withdraw the pension proposal, or we'll see you next year," Paff said. "If they were to do that, the TDU as well as the rest of the UPS Teamsters would rally behind them."
Some speculate that one way UPS Freight could be used as a bargaining chip in the current negotiations would be to agree to a card check at all 300 service centers in UPS Freight''s network - in exchange for agreeing to get out from under the multiemployer pension fund. It has been estimated that it would still cost UPS anywhere from $4 billion to $10 billion to payoff its pension obligations under the fund.
"UPS is pretty smart, and if they look at the numbers and it made sense, they'd jump at it," said Art Hatfield of investment firm Morgan Keegan. "It might not be a good deal for the Teamsters, but it would be great for UPS. They've got a lot of cash, and even if it was an $8 billion or $10 billion hit and they had to raise debt to pay it, they''d be swapping out an uncertain liability for a certain one. That would be a positive change to the balance sheet."
Meanwhile, YRC and Arkansas Best, which will be renegotiating the National Master Freight Agreement with the Teamsters later this year, are keeping close tabs on UPS and whether it is successful in negotiating its way out of the pension fund.
"We'll be bargaining with the same group, and UPS is participating in all the same pension funds we are, so it will certainly be of interest to us," said Mike Smid, president and CEO of YRC National Transportation.
According to Securities and Exchange Commission documents, YRC contributed $542 million to the pension plans last year, up from $472.7 million in 2005 and $378 million in 2004. The company estimated its full withdrawal liability to be $3 billion to $4 billion, payable over 20 years.
"Yellow Transportation, Roadway and the applicable subsidiaries of Regional Transportation have no current intention of taking any action that would subject us to withdrawal obligations," the company said in an SEC document filed earlier this year.
However, at a conference hosted by Bear Stearns May 8, YRC Chairman, President and CEO Bill Zollars said he considers the multiemployer pension plan "an investment like any other investment," and negotiating a deal to exit the plan "all depends on how much we put in and what we get back for it."
At the same conference, Arkansas Best President and CEO Robert Davidson was more explicit.
"We can provide the same benefits that we're providing now directly to our employees at significantly less cost than we're now paying. That money would allow us to amortize the withdrawal liability that we would pay to the funds, and would lower our operating ratio to allow us to be even more competitive in the marketplace."
ABF estimates it would cost the company $600 million to $650 million to withdraw from the plan, payable over a 10- to 15-year period.
"We have the capital structure to allow us to do it, so the plan is to pursue that aggressively, and hope Yellow and Roadway are on board with us for it," Davidson said.
Whether or not UPS Freight is used as a bargaining chip in the negotiations, Wall Street believes UPS Freight will eventually be organized.
"We continue to believe that the model contract worked out with Indianapolis will not include restrictive work rules like the National Master Freight Agreement, allowing them to operate as they always did as a nonunion carrier," said Stifel Nicolaus analyst John Larkin.
"Wages and benefits should go up, as the carrier is unionized, but UPS, as the largest employer of Teamsters in the world, will more than offset any labor cost disadvantage with added density and improved efficiency."
June 18, 2007: Yellow has given the union a proposed change of operations that would lead to the closing of the Columbus Ohio breakbulk and road operation. Local 413 would lose 182 jobs (92 road plus 90 dock, shop and yard).
The work would be aligned, most of it through Chicago, Cleveland and Indianapolis. Management wants the proposal to be heard and approved by the Change of Operations committee on July 17.
For a copy of Yellow management’s proposed change, click here.
June 8, 2007: Thousands of Teamsters are working under the national freight agreement at wages that are at or below nonunion scale.
Most are not “trainees” but Teamsters with years of experience.
This problem can be corrected in the upcoming contract.
The NMFA has a starting wage of 75 percent of scale, which is now about $16.50 per hour. Over a two-year period, a Teamster will lose about $25,000 in wages before reaching union scale.
The tiered wage creates divisions among Teamsters. It gives companies an excuse to use more casuals, because they claim they are having trouble hiring people. It’s to time return our contract to union scale for all.
IBT Survey: Too Weak
In late May the Teamster Freight Division sent all local union officials a survey on the NMFA. The good news is that the survey recognized that the tiered wage is a problem.
The bad news: it didn’t even offer the option of eliminating the tiered wage. It offered three choices: shorten the progression, increase the start rate, or start experienced Teamsters at full scale.
That last option—retain the tiered wage except for experienced Teamsters—it might look inviting, but it could be a disaster. If you give an employer a choice of hiring an experienced Teamsters at $22 or someone from a nonunion carrier at $16.50, you may make it hard for Teamsters to gain work in freight.
The answer is clear: end the tiered wage.
June 8, 2007: Where is the Freight Division of our union? While Ken Hall and Hoffa “seriously consider” allowing UPS to split apart the Central States Pension Plan, the Freight Division should be sounding the alarm.
Behind closed doors, maybe they are. But it’s time to come out of the closet and speak out to defend our pension plans and our Teamster unity. Teamster leaders are elected to be the members’ voice to Hoffa, not the other way around.
One week after Ken Hall put out a press release about UPS wanting to pull out of the Central States, freight Teamsters got a nearly identical message from Freight Director Tyson Johnson.
For years now, Tyson Johnson and our own local leaders have been telling us how detrimental it is for any company to pull out of our pension fund.
A one-time payment from UPS is fine for the short term, but what about 20 years down the road? Pulling 40 percent of the contribution base out would be disastrous. Tyson Johnson needs to stand up for all Teamsters and tell Hoffa and Hall there’s nothing to negotiate with UPS when it comes to destroying Teamster pensions and Teamster power.
Greg Smith is a clerk at Yellow in Cleveland Local 407.
“We believe there is an opportunity in this negotiating cycle to withdraw from some or all of these [Teamster pension plans] and provide benefits directly to our employees…”
“We view the multiemployer [Teamster pension] withdrawal opportunity to be the most significant thing facing us.”
Robert Davidson, CEO of ABF, May 8, 2007
There you have it. The CEO is telling you that ABF would love to bust our pension plans and take over employee pensions in the next round of negotiations.
We should push that off the table right from the start, and let the carriers know that we are bargaining to improve health care and pensions, not turn control over to the employers.
The best way to start would be setting a precedent in the UPS and UPS Freight negotiations: bring more brothers and sisters into our Teamster pension plans, and not split them up.
June 8, 2007: Freight Teamsters be warned: the Freight Division apparently isn’t considering fighting to restore retiree health coverage where it has been devastated. Nor is there a plan to win a timetable for pension improvements.
On May 30 a three-page Freight Survey was mailed to all local union officers.
It has three questions (out of 15) on pensions and health care. But none of them call for any choice other than “maintaining Teamster pension plans” or “maintaining Teamster health plans.”
Maintaining a health plan is not anywhere near what we need.
We need affordable retiree health coverage restored in this contract in the Central States Fund and in other areas where it has been cut—guaranteed, in writing.
It is practical, it is in winnable, and it is necessary to restore promises made to Teamsters, and to keep our union growing and organizing.
June 8, 2007: Thanks to a lawsuit by a Roadway Teamster, workers who are off drawing disability pay and using Family Medical Leave Act (FMLA) time should no longer be forced to use up their vacation time. An employee should now have the option to take the vacation pay, or save the accrued vacation time.
But Yellow Freight doesn’t recognize the decision by the Seventh Circuit U.S. Court of Appeals. They insist that they will continue to make Teamsters exhaust their vacation time. The IBT Freight Division issued a statement to the effect that they intend to enforce this improvement.
June 8, 2007: There is a glaring weakness in Teamster national contracts—UPS, freight, and carhaul—which should be corrected in this bargaining round. The contract lets employers require a Teamster off on family or medical leave to burn up their vacation time.As it stands at present, if an employee uses leave time because of a childbirth or to care for a sick parent, they cannot take any vacation that year.
The court case referenced above is only a partial solution. It says that a Teamster who is drawing disability pay from a health and welfare fund is protected from vacation exhaustion, but Teamsters on FMLA time who are not drawing disability pay are not protected. It’s time to fix this in all national contracts.
UPS has put an offer on the bargaining table to take 42,000 UPS Teamsters out of the Central States Fund. The CEO of ABF just announced he wants to pull out of all Teamster benefit plans.
The Hoffa administration is also considering a deal to keep all UPS Freight Teamsters out of our traditional Teamster pension plans as part of a contract that would be substandard to the NMFA.
Together, these proposals would put Freight Teamsters in jeopardy. They would undercut our bargaining power before the 2008 NMFA talks and they would put our future benefits at risk.
Freight Teamsters won’t have a vote on the UPS contract or the UPS Freight deal in Indianapolis—but we do have a voice and it’s time to use it.
We need to call on our leaders in the Freight Division to stand up for Freight Teamsters: no deals with UPS or UPS Freight that would undercut our contract or our pensions.
Call 202-624-6800 or fax 202-624-8722.
May 22, 2007: YRC is acquiring trailers with flip-signs that say Roadway on one side, and Yellow on the other.
This will provide a pool of switchable trailers, especially for rail use. A number of Teamsters have expressed concern that it is a sign that merger of Yellow and Roadway may be on the horizon. But no major integration of operations is expected soon.