Traffic World: ABF Wants Out of Pension Funds

May 11, 2007: by John Gallagher in Traffic World Online --Arkansas Best Corp. President and Chief Executive Officer Robert Davidson said he's willing to take the financial hit necessary to negotiate with labor an end to its multiemployer pension fund contributions.

"We can provide the same benefits that we're providing now directly to our employees at significantly less cost than we're now paying," Davidson told Wall Street analysts at a conference sponsored by Bear Stearns in New York May 8. "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."

According to SEC filings, ABF estimates it would cost the company $600 to $650 million in "contingent liabilities" to withdraw from the plan, payable over a 10 to 15 year period.

Such a move, however, is likely to be a major sticking point with the International Brotherhood of Teamsters. The National Master Freight Agreement expires in March 2008, and both sides are gearing up for the latest round of talks.

It could also prove a sticking point with YRC Worldwide, which is also part of the NMFA.

"We probably have a little bit of difference" with YRC when it comes to the pension issue, Davidson said. "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."

YRC President Bill Zollars, who was on the same panel with Davidson, said he considers the pension issue "an investment like any other investment, and what the return on that might be. It all depends on how much we put in and what we get back for it."

Satish Jindel, a principal with SJ Consulting Group, said if the Teamsters are willing to negotiate a pension fund withdrawal as part of the contract, ABF and other union carriers would be in a better position to compete with non-union carriers.

But he pointed out that the last attempt by union carriers to seek changes in pension plans with union workers was in 1997 by UPS - which resulted in a 14-day strike.

"Ten years later, if the union is realizing they need to show flexibility to give companies the opportunity to grow and create more jobs, that would be great news. But I'm not sure what leverage (management) has other than (warning labor about) the possibility of losing more jobs to non-union carriers."

Click here to see the full article in Traffic World Online.
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