For YRC Worldwide, it’s onto Plan B in the wake of the stunning rejection of a five-year deal to continue 15 percent wage and benefit cuts by its 26,000 Teamsters workers.
So what is next? Whatever road YRC chooses, it’s clear that shippers hold the key to long-term survival of the venerable 90-year-old company whose roots date to the golden age of trucking.
YRC officials were studying their options in the hours after the labor pact was rejected by a 61-39 percent margin. That sharp reversal of support from the Teamsters rank and file followed three votes that approved previous wage cuts—by 77 percent in January 2009, 58 percent in August 2009 and 62 percent in October 2010.
Most executives at rival LTL carriers believe YRC must have some contingency plan in the wake of the contract rejection. “Otherwise they would not have pushed for this vote so early ahead of the old contract expiring,” one rival LTL executive said privately.
YRC CEO James L. Welch made the continuation of those wage cuts until 2019 the linchpin of his efforts to refinance as much as $1 billion in long-term debt. Most of that debt was incurred by a pair of billion-dollar purchases, Roadway Express (in 2003) and USF Corp. (in 2005), engineered by then-CEO William Zollars, who left the company in 2011.
Welch is insisting it’s “business as usual” for YRC’s regional and long-haul units, which collectively are the largest group of LTL carriers in the nation, with more than $5 billion in revenue and 15,000 power units of capacity.
Welch is blaming the timing of his pitch to Teamsters, who were being asked to extend a five-year wage cut just days before Christmas. Many Teamsters balked. Privately, some Teamsters chafed at what they viewed a take-it-or-leave-it approach to bargaining.
Welch cut his deal with the national Teamsters freight organizing committee. The committee recommended passage, but did not negotiate in the traditional sense, leading to the belief by many YRC employees they were not being fully consulted on the measure.
“Our members have sacrificed billions of dollars in wages and pension benefits over the past five years and yet the company has been unable to recover from the disastrous policies of the previous management,” Teamsters President James P. “Jim” Hoffa said in a statement.
Whatever the Teamsters’ feelings, the financial noose is tightening. YRC is facing about $953 million in debt coming due in the next 15 months. It has a $69.4 million bond issue that matures on Feb. 15. It has $325.5 million of loans due in September and $556.7 million of loans and bonds maturing in March 2015. All told, YRC is operating with more debt than all the other publicly held LTL carriers combined.
“While we are disappointed in the outcome of the vote, we believe that timing of events related to our refinancing did not work in our favor,” Welch said in a statement. “Many employees had already returned their ballots prior to December 23, the date the company announced it had a refinancing agreement in place. We believe that was information employees needed to make a fully informed decision.
“Despite the vote results, it is business as usual as we have approximately 15,000 trucks on the road today serving 250,000 customers,” Welch continued. “We will keep our customers, employees and stakeholders advised of our efforts.”
Satish Jindel, principal of SJ Consulting, Pittsburgh, which closely tracks the LTL sector, says YRC’s fate largely rests in the hands of shippers and employees.
“There are really four groups—employees, customers, banks and shareholders,” Jindel told LM. “The banks and shareholders will not save the company. Employees and shippers will.”
While Jindel says YRC faces an uphill fight, it is not impossible. He drew distinct differences between YRC’s plight and that of fellow unionized long-haul carrier Consolidated Freightways, which suddenly closed on Labor Day 2002 following years of losses. YRC has lost in excess of $3.1 billion since 2006.
“They have a rough road, and it has gotten more difficult for them,” Jindel said. “But they are not running out of money, like CF. Management is different. They will fight until the last person is left on the ship before they jump off.”
Jindel estimates YRC has approximately $250 million in cash and cash equivalents on hand. That’s enough to handle operational losses and debt payments for the next six to nine months. “But that will not save them going into 2015,” Jindel warned.
What is needed is a sound long-term refinancing of a lion’s share of that $1.3 billion in long-term debt, Jindel said.
Toward that end, Jindel is recommending YRC management focus its attention on shippers and employees first, then lenders and finally shareholders.
“Shareholders are absolutely not of any importance; they will not save the company,” Jindel said. “If management spends its attention on employees and shippers, they will have better ability make changes to win support of employees to reconsider what they are asking. If they spend time worrying about shareholders, like the previous management did, time will go by very fast.”
Jason Seidl, trucking analyst with Cowen & Co., said in a note to investors that rival LTL carriers could see a “sudden surge” of new freight as YRC’s liquidity problems intensify in the wake of the rank-and-file rejection of the wage cut.
This freight diversion could be a death spiral that leads to a possible Chapter 7 or Chapter 11 bankruptcy. In the history of trucking, there has not been a single large carrier that has filed for bankruptcy and survived as an ongoing concern. That’s because shippers quickly flee to rival carriers.
For his part, Jindel is not worried about that. “Not at this point,” he said. “A lot of things can be done in a year. From a shipper’s point of view, they shouldn’t worry about needing to convert (to another carrier). As long as they have good service at the right price, there is no need to change.”
Analyst Seidl differs on that and said in his note to investors, “Bankruptcy cannot be ruled out at this point, in our opinion. Investors will recall that this is the second major liquidity debacle the company has faced in the last five years. On the heels of the last recession, the various YRCW stakeholder groups agreed to take a good deal of pain to help the company stave off bankruptcy.
“This was ultimately accomplished through massive equity dilution, which only pushed the liquidity issues to the back burner while the company attempted to focus on an operational turnaround to regain profitability and cash generation. We would not be surprised if the re-emergence of major balance sheet problems leads many stakeholders to the conclusion that bankruptcy may now be needed to restructure the company’s finances.”
Then, ominously, Seidl concluded, “Restructuring, however, will not likely work in the LTL industry.”
Even if bankruptcy is avoided or delayed, the uncertainty surrounding YRCW’s financial position could be enough to make customers “concerned,” Seidl said.
“Many of them may already be exploring the option of redirecting at least some freight to other carriers,” Seidl said “The likely leakage would help reduce the LTL industry’s capacity, providing a welcomed boost for pricing on existing business for carriers” where rate increases have been around 3 percent most of the last few months.
Among the potential winners from a YRC bankruptcy would be fellow long-haul unionized company ABF Freight, which just won a 6.5 percent wage concession last year, and non-union rivals Old Dominion Freight Line, Con-way, and FedEx Freight.
Teamsters for a Democratic Union, which has been vocal in its opposition to the Hoffa administration, is advising the International Union to “finally step up to the plate” and bargain immediately with YRC. That would help assuage YRC’s lenders and save Teamster jobs “without completely gutting the contract,” TDU said on its website.
“Teamsters at YRCW may accept an extension. They may accept some changes that they don’t like. But they won’t accept a complete giveaway, with no bargaining by their own union,” the TDU statement concluded. “26,000 Teamsters jobs in the heart of Teamster power are on the line. It’s time to forget politics and get to work saving Teamster jobs.
January 9, 2014. 5 p.m. The counting of YRCW ballots has ended with the contract extension rejected by a vote of 12,028 to 7,623. You can see the results by local union here.
The votes in most of the biggest locals counted are decisively No, and many smaller locals voted No also.
What is the Plan B? Since rank and file opposition to the concession deal has been widespread and well-known, the International Union and YRCW should be hard at work on that already.
The count supervisor, Ed Hartfield, will announce the final results soon.
This site will be updated as information becomes available.
January 9, 2014: The YRCW contract extension has gone down to defeat. What’s next?
The company has hinted that it could be bankruptcy, and we sincerely hope for the sake of 26,000 Teamsters, their families and their communities that they will not take that route.
The International Union should step up to the plate and bargain immediately with YRCW, while simultaneously dealing with the banks to save Teamster jobs without completely gutting the contract. There is no time to lose.
Teamsters at YRCW may accept an extension. They may accept some changes that they don’t like. But they did not accept a complete giveaway, with no bargaining by their own union.
It’s time for Hoffa and Hall to take some responsibility. Freight Director Tyson Johnson says he never bargained with the company over the proposed extension. What was he doing when he met with them?
26,000 Teamsters jobs in the heart of Teamster power are on the line. It’s time to forget politics and looking out for Harry Wilson’s million dollar fees, and get to work saving Teamster jobs.
Here are the local-by-local votes counts; this list will be updated.
January 9, 2014: Updated 6 p.m. Below is the YRCW vote count. The count is based on reports from observers and maybe subject to change
|5||Baton Rouge, La.||6||7|
|222||Salt Lake City, Utah||123||86|
|238||Cedar Rapids, Iowa||38||26|
|251||East Providence, R.I.||71||92|
|326||New Castle, De.||17||13|
|340||So. Portland, Maine||23||10|
|364||South Bend, Ind.||101||119|
|371||Rock Island, Ill.||48||56|
|402||Muscle Shoals, Ala.||13||28|
|406||Grand Rapids, Mich.||144||172|
|414||Fort Wayne, Ind.||68||78|
|542||San Diego, Calif.||27||22|
|560||Union City, N.J.||24||28|
|597||South Barre, Vt.||26||5|
|600||Maryland Heights, Mo.||81||357|
|631||Las Vegas, Nev.||13||16|
|657||San Antonio, Texas||96||34|
|673||West Chicago, Ill.||36||24|
|701||North Brunswick, N.J.||82||23|
|769||North Miami, Fla.||74||70|
|833||Jefferson City, Mo.||4||3|
|856||San Bruno, Calif.||4||3|
|878||Little Rock, Ark.||2||21|
|962||Central Point, Ore.||52||18|
|964||Brook Park, Ohio||12||6|
|986||Santa Maria, Calif.||3||0|
|995||Las Vegas, Nev.||2||0|
January 8, 2014. 3:30 p.m. The ballots for the YRCW contract extension will be counted today and tomorrow. At the first postal pick up at 8 am, the post office count was 19,483 ballots. The final pick up at Noon brought about 150 more. The postal estimates may be subject to correction when the ballots are counted later.
They are sorting the ballots into the various local union trays, and starting to open some ballots, but none have been counted yet. They are not checking eligibility; but accepting all ballots mailed in as valid, unless an observer challenges a particular ballot.
We do not expect any results until late today or very possibly until tomorrow, as processing and sorting by local will take a long time. The count supervisor, Ed Hartfield, estimates that the count will be completed by Thursday afternoon.
In the October 2010 YRCW concession vote, there were 23,000 ballots counted, but there were many more YRCW Teamsters at that time. The postal estimate today reflects about a 75% turnout.
This site will be updated as information becomes available. Stay tuned. We will post results by local union after they begin counting.
Two days of ballot counting starts Wednesday morning, with the paychecks of 26,000 Teamsters and the future of YRC Worldwide Inc. hanging on the outcome.
This is the fourth time in five years the unionized drivers, dock workers, mechanics, clerks, porters, janitors and maintenance workers have voted on reduced pay and benefits. Each time, the struggling Overland Park-based trucking giant has said it needs the concessions to survive and compete.
Click here to read more at the Kansas City Star.
January 3, 2014: Millionaires like Harry Wilson are getting rich off the concessions that are destroying good union jobs.
Our union should be leading the fight, but Hoffa Jr. is no Hoffa. He has turned his back on freight, UPS freight, carhaul, and trucking Teamsters.
Complaining in the break room won’t save our pensions or our union. But rank-and-file Teamsters standing together can take back our union.
In some locals, TDU members have defeated pension cuts, elected new leadership, and won better contracts. To take back the International union, we need a united movement.
Don’t give up, step up. Join TDU today.
Teamsters before us put their lives on the line to win what we have. $40 is a small investment to stop Hoffa Jr. from throwing it all away.
January 3, 2014: It has been one of the biggest failures of leadership in Hoffa’s 15 years in office. YRCW Teamsters were mailed a ballot for a five-year contract extension, without the union leadership even bargaining for them.
Whatever the outcome fo the vote is, we know this for sure: the Hoffa-Hall leadership has abandoned freight Teamsters.
For 15 years they have done nothing to defend our union or to organize in freight, or in carhaul, or other trucking fields. They don’t have a strategy and don’t understand Teamster power. They have not organized; they have not defended the national master contracts or the members’ pensions.
Now they have refused to even bargain for YRC Teamsters. They have left members to fend for themselves.
They take better care of their hedge-fund friend Harry Wilson than they do the Teamsters at the center of Teamster power and Teamster history.
If you voted yes, or if you voted no, know this: Hoffa and Hall gotta go. We need a new direction in our union. The time to build a movement to make it happen is now.
We Need to Clean House
“Regardless of how you voted on the new round of givebacks, you know we didn’t get any real leadership out of Hoffa and the freight division. And we do need leadership if our union is going to survive in freight. We need to clean house at the top of our union.”
Don McClure, YRC, Local 728, Atlanta
What “Equal Sacrifice?”
“Upper management continues to take high salaries and annual bonuses. Terminal management is over staffed in many locations. Where are their cuts and so-called “equal sacrifice”? Welch and his buddies put it all on Zollars, but working Teamsters continue to see mismanagement and incompetence. Why should Teamsters have to pay for it?”
Jim Price, YRC, Local 107, Philadelphia
January 3, 2014: Meet Harry Wilson. Hoffa appointed this Wall Street tycoon to the YRC Board of Directors. Now Wilson is making millions on the YRC concessions deal.
Hoffa appointee Harry Wilson has received, or stands to receive, as much as $15 million for dealing with distressed companies that bargain with the Teamsters since he was first tagged by James Hoffa to work on YRCW’s 2011 restructuring. This includes a $5.5 million bonus if YRC members approve the concessions and a bank deal is consummated.
Who is this man?
Wilson’s early career was with various hedge fund and private equity firms. He made it big on Wall Street and retired at age 36.
He entered government work, and served as a major player on the Auto Industry Task Force, working on the GM and Chrysler bankruptcy cases. Then Wilson, a Republican, went into politics. He unsuccessfully ran for Comptroller of New York State in 2010.
Soon after that political foray, Wilson formed MAEVA Advisors in 2011. MAEVA is a low-profile operation, with a one-page website (maevaadvisors.com) that lists nothing but a phone number and an email address.
Then he hooked up with the Hoffa administration.
On February 28, 2011, Hoffa announced that Wilson was joining the YRCW restructuring efforts on behalf of the Teamsters to “break the logjam between the company and the lenders’ group.” Wilson also had a role in the Hostess restructuring, with MAEVA reportedly receiving $200,000 per month over an extended period. In October 2013 MAEVA filed papers requesting payment of $3.5 million in the bankruptcy court in the case. If Hostess had survived, the company would have been required to pay MAEVA’s fees.
But YRCW was a bigger cash cow. Wilson’s initial YRCW work in early 2011 paid him $125,000 per month, plus a bonus of $1.5 million in July 2011. That was just weeks after Tyson Johnson excitedly told the Teamster Convention in Las Vegas of the YRCW restructuring, in which Hoffa named Wilson as an IBT appointee to YRCW's board. Sources claim that Wilson convinced his fellow board members to pay him an additional $1.5 million for his role in the restructuring, for a total payout of over $3 million for work that lasted only five months.
Wilson is paid $175,000 per year as a member of YRCW’s board.
During the November meeting of Teamster local officers in Dallas, YRCW’s CFO, Jamie Pierson, told the Teamster officials that they had evaluated various restructuring experts and determined that MAEVA was the best resource to lead the restructuring.
On February 1, 2013, the YRCW Board engaged fellow board member Wilson to lead a strategic initiative related to restructuring again the company’s deals with the banks. The engagement agreement (contained in SEC filings) explicitly states that the IBT approved of this arrangement! According to the contract Wilson is receiving $250,000 per month and is eligible to receive a completion bonus not to exceed $5.5 million if members approve the concessions and the deal is consummated. Wow.
It seems odd for a public corporate board to select one of the directors to function as the company’s investment banker. This is complicated by the fact that Wilson was appointed by the IBT in part to protect the interests of Teamster employees. But the deal he has engineered requires those Teamsters to accept new concessions. Add to that the extra $5.5 million Wilson has riding on the concession vote. That’s quite a web of potential conflicts.
One thing is certain: no concessions will be taken by Hoffa, Ken Hall, or their appointee, Harry Wilson.
Freight Teamsters: Don't Give Up. Step Up.
Millionaires like Harry Wilson are getting rich off the concessions that are destroying good union jobs. To take back the International Union, we need a united movement. Don't give up, step up.