ABF, Teamsters extend labor contract negotiations for 30 days

John D. Schulz
Logistics Management
March 29, 2013

ABF Freight System, the seventh-largest less-than-truckload (LTL) carrier by revenue, said today that it has made inroads on its hotly-contested contract with the International Brotherhood of Teamsters that was scheduled to expire on March 31, which has led to a 30-day extension for the National Master Freight Agreement.

ABF officials said negotiations are scheduled to resume the week of April 8 and that service to shippers remains business as usual.

“We thank all of our employees and customers for their patience and commitment to ABF during this important process,” ABF said in a statement.

And Teamsters for a Democratic Union, the dissident wing of the 1.4 million member union, said in an online note to its members said that bargaining continues “with the company in the driver’s seat, focusing on concessions being demanded by management on operations, unbalanced freight lanes, and more,” adding that supplemental bargaining has proceeded also.

“Bargaining on economics (wages, pensions, health and welfare) has apparently not taken center stage yet,” TDU said in a statement.

TDU added that in a conference call with local union leaders today, IBT International vice president Gordon Sweeton and IBT staffers stated that the company needs relief and that another call will be held in two weeks to update local officers on the negotiations.

In December, union locals representing 7,500 drivers, dockworkers, mechanics, and clerical staffers at ABF asked the seventh-largest LTL carrier for a two-year contract with healthy wage and benefit increases.

As previously reported, Teamsters locals are asking ABF for $1-per hour wage increases and additional contributions to their pension, health and benefit package.

The company has already asked that it negotiate separately from chief union rival YRC Worldwide, which has been revived financially under new President and CEO James Welch.

And if the company were to agree with a two-year contract, that would mean the next contract would expire in 2015—when YRC’s contract covering some 20,000 Teamsters also expires.

After breaking away from chief rival YRC Worldwide in an attempt to negotiate separately with the Teamsters National Freight Industry Negotiating Committee (TNFINC), ABF made an initial contract offer that the union says insulted ABF’s 7,500 drivers, dockworkers, mechanics and clerical staff.

The Teamsters immediately responded with a press release that called that initial offer insulting and a “non-starter.”
A second round of negotiations in Kansas City starting Jan. 7 did not fare much better, according to the head of the Teamsters freight negotiating committee.
“ABF’s initial contract proposals ... seek to destroy the NMFA standards that have been in effect for decades and served ABF well,” Gordon Sweeton, co-chairman of the Teamsters negotiating committee said in a press release.  “We hope the company will bargain in a traditional manner so that we can make progress on the important issues from the start.”
Among the initial demands by the nation’s sixth-largest LTL carrier, ABF wanted to eliminate all supplemental agreements to the basic contract; reduce paid time off; eliminate the longstanding grievance procedures that have been in effect for more than half a century; expand use of nonunion subcontractors, expand use of worker surveillance; and create new, lower-paying part-time positions in most job classifications.
ABF has responded with details of its current financial plight. Its stock price has plummeted by more than 80 percent in the past two years to trading around $9 a share at press time. It says its high labor costs are responsible for more than $230 million in losses since 2009.
ABF says its goal is to secure a new contract that allows ABF to “substantially lower its costs, become more flexible and better compete in a rapidly changing marketplace” that has seen hundreds of union carriers go out of business and non-union carriers proliferate.
In a press release describing its negotiating goals in general terms, ABF says it is negotiating its own national contract to create “an unprecedented opportunity” for both parties to work together and fix the labor cost problems that have led to its current financial plight.
In its statement, ABF says was “disappointed” to see a public update distributed by the Teamsters prior to the start of its contract talks stating that “management labor costs” are excessive, and that an economy growing at 4 percent annually would somehow fix ABF’s problems.
“Neither of these statements is correct, and it is important to clarify misconceptions and focus on what ABF really needs to compete,” the company said in its statement.
As for executive compensation, the company says that parent Arkansas Best Corp. CEO Judy McReynolds’ salary and incentive was 58 percent of the average of the other similar industry companies’ CEOs in 2011. In other words, ABF says she was paid about 40 percent less than her peers. In addition, all of the compensation of ABF officers including Ms. McReynolds adds up to less 0.5 percent of ABF’s costs, according to the company.
ABF claims chief rival YRC paid its former CEO Bill Zollars $2.5 million in total compensation for just five months in 2011 before he left the company.  That’s nearly twice what Arkansas Best’s CEO was paid for the entire twelve months of 2011, ABF says.
In contrast, ABF says its Teamster employees enjoy the highest levels of pay relative to all of their peers in the LTL industry in total compensation including wages, health and welfare, and pension. Last year alone, ABF paid $244 million in just union pension, health & welfare. More than half of that huge amount, $132 million went to union pension expense alone.
Further complicating matters are two extraneous factors that privately are infuriating the Teamsters:
-The union is currently the subject of a lawsuit by ABF over the 15 percent wage givebacks that the union rank-and –file approved to keep financially ailing YRC Worldwide, its chief competitor, alive; and
-Last June’s purchase by ABF parent Arkansas Best Corp. of Panther Expedited, a non-union expedited carrier specializing in same-day shipments, for $150 million
ABF, the largest unit of parent Arkansas Best Corp., has suffered financially during the Great Recession and its aftermath. Its stock has lost more than 75 percent of its value and was trading as low as $8 per share recently. It is close to $12 per share at press time.
Arkansas Best posted a net loss of $7.9 million in the fourth quarter compared to net income of $1.4 million during the fourth quarter of 2011. For all of 2012, ABF had a net loss of $7.7 million compared to net income of $6.2 million in 2011. Company officials have publicly cited its high cost structure when compared to chief non-union competitors such as Con-way and Old Dominion Freight Line.

“We are focused on a return to profitability at ABF by substantially lowering our costs in the next labor contract through negotiations that are now underway,” McReynolds said in a statement. “ABF’s management team is hopeful it will reach an agreement with the Teamsters that allows us to preserve good-paying jobs and protect our employees’ retirements through a lower cost structure that truly reflects the competitive nature of today’s LTL marketplace.”

ABF currently is suing the Teamsters over what it views as an unfair cost advantage that YRC currently has. YRC Teamsters earn about 15 percent less than ABF Teamsters, even though both companies are signatories to the National Master Freight Agreement.

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