Carhaul Contract Under Fire

July 2006 - Allied Automotive Group’s 3,800 US Teamsters got a raise on July 1 when the 10 percent cut imposed by the bankruptcy court expired without being extended. Just as important to carhaulers was the news that Yucaipa Companies, a Los Angeles firm controlled by billionaire investor Ron Burkle, is taking an interest in acquiring Allied.

Allied withdrew its motion in court to extend the 10 percent pay cut for another three months, when their own records showed that they made an operating profit in May and had not drawn on the credit they said they would need to continue.

Yucaipa bought $100 million of Allied debt from Morgan Stanley for about $70 million and is looking to possibly take over Allied. Top management figures have indicated they are hostile to this move; presumably they will be gone along with CEO Hugh Sawyer if Yucaipa does acquire the biggest carhaul company in North America.

Behind the scenes Yucaipa has contacted the Teamsters Union. Burkle is a prominent Democrat and presents himself as union-friendly; this is not the first troubled unionized company he has moved to take over.