YRC Worldwide Inc. wants a five-year extension of its labor contract with the International Brotherhood of Teamsters, the labor union confirmed during a Monday conference call with its local leadership.
It's unclear what else — if anything — the Overland Park-based trucking company (Nasdaq: YRCW) wants in the negotiations with the union that represents more than 25,000 of YRC’s 32,000 employees.
On Tuesday, the Teamsters for a Democratic Union — a dissident group within the union — published details from a conference call between leaders of local unions and the Teamster’s National Freight Industry Negotiating Committee.
That report said the company seeks more “flexibility” but did not provide specific demands. Vic Terranella, president of Kansas City’s Teamsters Local 41, was on the conference call. He confirmed that little happened on the call.
“Really nothing happened,” he said. “There were no specifics that were shared with us.”
Terranella said the company seems more relaxed now that the union is sitting down to talk about an agreement. He noted that the Nov. 15 deadline the company shared with the union when the two sides met earlier this month in Dallas passed with little fanfare from YRC. The company has said that it has $1.4 billion in debt payments coming due in 2014 and 2015 and that a new deal with the Teamsters is crucial to paying those debts.
There should be further conference calls as the two parties continue to meet, Terranella said. YRC’s next big deadline is Feb. 15, when a $69 million payment comes due. No time lines or additional deadlines were announced during the call, he said.
The Teamsters’ national office in Washington has declined to comment on the negotiations. Representatives of YRC typically do not comment on ongoing negotiations, either.
YRC seeks an extension or an amendment to its current contract with the Teamsters. The two parties' current contract runs through March 2015. YRC has told the union it needs to extend the life of that contract into 2019. The company said an agreement is necessary for it to pay debts incurred under the watch of former CEO Bill Zollars.
The existing labor agreement is based on three rounds of concessions the company and the union agreed on between 2008 and 2010. The union consented to a 15 percent cut in wages, suspension of pension payments and reduced vacation time for members. YRC began to make pension payments again in early 2012 at 25 percent of the rate paid in 2009.
The deal saves YRC an estimated $350 million in labor costs annually. It also gave Teamster employees stock in the company and granted the union the right to nominate two members to the YRC board.
YRC reported its third-quarter earnings on Nov. 12. CEO James Welch said the company was not pleased with the results. The market apparently isn't either. About 2:30 p.m. Wednesday, YRC’s stock price had sagged to $7.30 a share from $10.22 at market open on Nov. 12.
Updated November 19, 2013: Talks have begun between YRC and the IBT Freight Division over a five year extension of the contract. Tyson Johnson held a conference call for local union officials today to report on the initial sessions.
Johnson said that no specific demands have been made by either side and that YRC is not asking for additional wage or benefit concessions, but wants more “flexibility.” When questioned on specifics, he said those would come out later and more conference calls would be held. He said the IBT staff and an outside consultant are reviewing YRC’s financial situation. When asked why the two YRC board members appointed by the Hoffa administration have not been helpful regarding YRC plans, he said they had not consulted with the IBT, and avoided further comment on their role.
A week earlier a conference call of officials overwhelmingly approved opening up the contract for the purpose of negotiating the extension as long as there were no new concessions.
YRCW CEO James Welch has made clear he is looking for fast action on extending the present contract until 2019. In today’s call Johnson said he would not let the company dictate a deadline.
The November 12 IBT conference call was just one week after Welch made his case to Teamster locals officials in Dallas on the proposal, and distributed materials. Each local was supposed to meet with YRC members or survey them.
The IBT constitution requires a majority vote of approval by the 26,000 YRCW Teamsters for any contract extension. Members should have a chance to discuss and evaluate any proposal before it is mailed out for a vote. TDU will continue to post information as it become available.
Click here to read Tyson Johnson's memo.
YRC CFO Jamie Pierson told Bloomberg that he did not expect to see negotiations completed before a Nov. 15 goal the company set when officials met with leaders of the Teamsters Nov. 5 in Dallas. YRC officials have said a deal must be completed soon in order for the Overland Park-based trucking company (Nasdaq: YRCW) to refinance before its debts begin to come due in February.
YRC formally acknowledged it is in “discussions” with the labor union that represents more than 25,000 of the company’s 32,000 employees but has not commented further on the situation. CEO James Welch did not take analysts’ questions on the subject during the company's quarterly earnings conference call.
Representatives of the Teamsters’ national office in Washington have also declined to comment on the negotiations.
YRC is seeking an extension or an amendment to its current contract with the Teamsters. The two parties current contract runs through March 2015. YRC has told the union it needs to extend the life of that contract into 2019. The company says an agreement is necessary for it to pay $1.4 billion in debts that were incurred under the watch of former CEO Bill Zollars which will come due in 2014 and 2015.
The existing labor agreement is based on three rounds of concessions the company and the union agreed on between 2008 and 2010. In those concessions, the union consented to a 15 percent cut in wages, suspension of pension payments and reduced vacation time for members. YRC began to make pension payments again in early 2012 at 25 percent of the rate paid in 2009.
The deal saves YRC an estimated $350 million in labor costs annually. It also gave the Teamster employees stock in the company and granted the labor union the right to nominate two members to the YRC board.
YRC Worldwide Inc. saw its third-quarter revenue increase by $15.9 million from the same quarter the previous year, and operating income dropped by $21.5 million during the same time period.
The Overland Park-based trucking company (Nasdaq: YRCW) brought in $1.253 billion in consolidated operating revenue in the quarter that ended on Sept. 30. That's up from $1.237 billion in the third quarter of 2013. Consolidated operating income was $5.8 million, down from $27.3 million reported in the same quarter last year.
The loss per share was $4.45, compared with a gain of 40 cents a share during the third quarter of 2012.
The report comes as YRC is asking members of the International Brotherhood of Teamsters to extend the two parties' current labor agreement for an additional five years. The current agreement runs through March 2015.
CEO James Welch has told leaders of the labor union that represents more than 25,000 of the company's 32,000 workers that the union needs to sign on to a new agreement soon for the company to be able to pay its $1.4 billion debt, which starts coming due early next year. If the union does not agree to an extension, the company could be staring down bankruptcy.
The current labor agreement is based on three rounds of concessions the company and the union agreed to between 2008 and 2010. In those concessions, the union consented to a 15 percent cut in wages, suspension of pension payments and reduced vacation time for members. YRC began to make pension payments again in early 2012 at 25 percent of the rate paid in 2009.
The deal saved YRC an estimated $350 million in labor costs annually. It also gave the company's Teamster employees stock and granted the union the right to nominate two members to the YRC board.
November 8, 2013: YRC CEO James Welch presented his case to Teamster local officers three days ago for a five-year contract extension, in order to secure new financing.
It was not an easy sell. A number of officers at the meeting in Dallas asked tough questions, on everything from the botched idea to buy ABF to what else YRC will be asking for.
Welch declined to specify anything else the company would request in bargaining, except new language to curb absenteeism. The materials distributed indicate that wage increases may be in the extension deal.
Welch stressed the urgency of the situation to refinance debt at lower interest rates. He requested to open up the contract and get a vote by 26,000 Teamsters as soon as the end of December on a contract extension. The first debt payment is due February 15, for $69 million, and Welch stated that an extension would need to be in place to secure refinancing from banks.
YRCW has delayed by a week reporting third-quarter earnings as it seeks to start talks with the IBT, according to numerous media reports on the situation.
IBT Freight Director Tyson Johnson told local officials to meet with YRC Teamsters, and then report to the Freight Division on whether they should agree to reopen the contract to discuss an extension.
Some locals are distributing the materials from the November 5 meeting to members, which outline the company's presentation.
YRC Worldwide Inc., saying it intends to negotiate an extended labor contract with the Teamsters union, has delayed release of its quarterly financial report.
The third-quarter financial report originally scheduled for Thursday has been pushed back to Tuesday of next week, a company statement said. The statement, released late Wednesday, did not indicate why a delay was needed.
The Overland Park-based trucking company said it intends to “engage in formal negotiations, extend its current contract (with the International Brotherhood of Teamsters) and increase its competitiveness in the market.”
Chief executive James Welch said in the statement that an extension would help secure jobs of the company’s 26,000 union employees and “substantially increase the likelihood” of refinancing the company’s debts.
Welch, in a letter to employees Oct. 30, said a new Teamsters contract was necessary before lenders would negotiate a refinancing. YRC has more than $1 billion in debts due in 2014 and 2015.
YRC’s announcement said “these developments” led it to postpone its earnings release.
The Teamsters have surrendered pay and benefits under their agreement with the company that expires at the end of March 2015. Their concessions helped the company avoid bankruptcy through two financial reorganizations. But with the economy still sluggish, YRC continues to struggle to return to financial health.
Company executives met in Dallas this week with more than 100 Teamsters officials, including Vic Terranella, president of Local 41 in Kansas City.
Terranella said the company didn’t talk about contract proposals but did say it wants a five-year agreement. He said a YRC official told the union representatives that the new deal would need to address absenteeism issues and profit sharing.
They also said, according to Terranella, that the new agreement would need to take effect immediately after approval rather than after the current contract expires.
The request adds to earlier suggestions that YRC may ask for additional concessions from the union rather than an extension of their current terms. Welch’s letter to employees had said the new contract would need to increase the company’s competitiveness, but it did not specify how.
YRC shares fell 71 cents Wednesday and closed at $10.13. The shares had jumped 28 percent Tuesday on reports that the company plans to ask for more concessions from employees.
YRC Worldwide Inc. had originally been expected to release earnings last week, but then it scheduled them for Thursday. On Wednesday afternoon, the Overland Park based less-than-truckload carrier (Nasdaq: YRCW) delayed its quarterly financial report to Tuesday.
If YRC can negotiate an extended labor contract — or perhaps even a better one — with its union, YRC CEO James Welch said in a Oct. 30 letter to employees that "Our lenders have made it clear the combined company needs to be performing better than it is today, and that we need a labor agreement with our Teamster employees that extends beyond our current expiration and any new debt maturities, and increases our competitiveness, before any refinancing can be completed."
Teamsters previously agreed to a 15 percent cut in wages, suspension of pension payments and reduced vacation time for members. Welch recently wrote that "Management has asked the (Teamsters) to work with us to support our refinancing efforts as an important next step in our turnaround. The time is now. The closer we get to our debt payment due dates, the less control we have over our own destiny."
YRC Worldwide Inc. says it needs the Teamsters to extend existing concessions if the company is to be able to refinance its debts.
James Welch, CEO of the Overland Park based less-than-truckload carrier (Nasdaq: YRCW), sent a letter to employees explaining why company executives are meeting with International Brotherhood of Teamsters leaders Tuesday in Dallas.
“Our lenders have made it clear the combined company needs to be performing better than it is today, and that we need a labor agreement with our Teamster employees that extends beyond our current expiration and any new debt maturities, and increases our competitiveness, before any refinancing can be completed,” Welch said in the Oct. 30 letter.
Both YRC and the Teamsters leadership in Washington have declined to comment publicly about whether there will be discussion of extending existing concessions at the Dallas meeting. However, rumors circulating throughout the union suggest the company could be seeking extensions through March 2017 or possibly March 2019.
The existing agreement is based on three rounds of concessions the company and the union agreed on between 2008 and 2010. In those concessions, the union consented to a 15 percent cut in wages, suspension of pension payments through the life of the agreement and reduced vacation time for members.
The deal saves YRC saves an estimated $350 million in labor costs annually. It also gives the Teamsters 25 percent ownership of the company and the right to nominate two members to the YRC board.
Welch's letter explains that although YRC is doing better than it was before Welch took over in July 2011, it has a long way to go before it can ride easy.
He said the company is “almost $1.4 billion” in debt due to “numerous missteps” made by the company’s prior management. Those debts, Welch said, require YRC to make “huge” monthly interest payments that — along with normal expenses — consume all of the company’s extra money.
“These debts will begin coming due in early 2014, and we have limited options and a tight time frame for addressing them,” Welch said in the letter.
The company now faces two choices: declare bankruptcy, or refinance the debt. Welch said lenders will require YRC to have a longer agreement with the labor union, which represents more than 25,000 of YRC's 32,000 employees. The current agreement runs through March 2015.
Welch said that refinancing the company’s debt will improve cash flow so YRC will be in a “far better position” to invest in the company and compete in the industry.
“I believe this is the path we should take because your job is worth saving,” Welch wrote. “Management has asked the (Teamsters) to work with us to support our refinancing efforts as an important next step in our turnaround. The time is now. The closer we get to our debt payment due dates, the less control we have over our own destiny.”
This is not the first time the company has suggested that it’s looking at refinancing the debt. On Aug. 7, when the company declared its second-quarter earnings, CFO Jamie Pierson said in a Securities and Exchange Commission document that Credit Suisse Group AG (NYSE: CS) and the New York-based investment firm MAEVA Group LLC were working on “a broad range of refinancing and recapitalization options.”
In late July, Credit Suisse issued a negative report about the company, saying YRC's stock was due to sag to $7 a share. At the time of that report, YRC stock was trading for more than $29 a share. It since has dropped to less than $9 a share.
The forbearance of YRC Worldwide Inc.'s unionized workforce is about to be tested again.
Tomorrow in Dallas, YRC executives will brief leaders of the Teamsters Union representing about 25,000 YRC employees. The meeting will cover the Overland Park, Kan.-based company's recent performance, its future prospects, and the need to prepare for the first of a round of debt obligations set to come due in 2014, the company said in a brief statement last week.
James L. Welch, the less-than-truckload (LTL) carrier's CEO, essentially outlined the meeting's agenda in a letter sent to employees Oct. 30. Servicing YRC's $1.4 billion debt load leaves the company with no money to reinvest in the business once wages, benefits, and regular operating expenses are paid, Welch said in the letter. YRC's lenders have told the company they will not agree to refinance its debt without, among other things, a new labor agreement that extends beyond the current compact's March 2015 expiration date. YRC's operational performance also needs to improve for its lenders to consent to a debt restructuring, Welch said.
In a true déjà vu moment, Welch said that any refinancing initiative "will require the help of our employees."
This would hardly be the first time YRC has gone to the workers' well. Both sides agreed to three extraordinary concessions during 2009 and 2010. The last round, in September 2010, extended the then-current contract for two years beyond March 2013, cut workers wages by 15 percent (after annual hourly increases in the 40- to 45-cent range), and allowed the company to resume in mid-2011 previously frozen pension contributions but at only one-fourth the level in effect before the freeze. The agreements sparked a lawsuit from unionized rival ABF Freight System Inc., which argued that they violated the National Master Freight Agreement, the pact that has traditionally governed labor relations in the trucking industry, by not being extended to all member companies.
Welch's latest call for sacrifice is unlikely to sit well with Teamster leadership. General President James P. Hoffa, who will not attend tomorrow's meeting, would "rather get his wisdom teeth taken out" than agree to further concessions, said a source familiar with the situation.
As YRC was spiraling downward towards bankruptcy in 2009, Hoffa worked both publicly and behind the scenes to keep the company afloat. He urged the rank-and-file to accept painful concessions and personally lobbied for a controversial debt-for-equity swap in late December that effectively saved YRC but resulted in existing common stock holders being virtually wiped out.
Most of YRC's problems can be laid at the feet of YRC Freight, the company's long-haul unit. The result of a disastrous integration of Yellow Freight System and Roadway Express following Yellow's 2003 purchase of Roadway, YRC Freight had been bleeding red ink for years, offsetting the otherwise stellar performance of the company's three U.S. regional subsidiaries.
Jeffrey A. Rogers, appointed by Welch in 2011 to run YRC Freight, seemed to be making progress on a variety of metrics. Then after a subpar second quarter attributed to the bumpiness of a big network integration, Welch fired Rogers in September and took personal control of the unit. Company sources said Welch had grown increasingly unhappy with the division's performance.
Since reaching an all-time high in 2005, YRC stock has lost nearly all its value. It has engineered two reverse stock splits in the past three years in the hope that the moves would boost the company's equity value by reducing the number of outstanding shares. YRC stock is up more than 23 percent so far this year but has been on a steep decline since it hit a yearly high in early July of above $35 a share. As of midmorning trading today, YRC shares changed hands at $8.51 a share.
Tomorrow's meeting, which had not been on the annual calendar, comes less than a week after the Teamsters ratified a five-year collective bargaining agreement with ABF. The compact, which calls for a 7-percent wage reduction that will be recouped over the contract's life, will yield between $55 million and $65 million in net savings for Fort Smith, Ark.-based ABF, which has the highest cost structure in the LTL industry. That will not only narrow the cost gap between the rivals, but it will likely give ABF the flexibility to pursue business, perhaps some of that being YRC's, that it had to pass on because its old cost structure wouldn't support it. The new contract took effect over the weekend.
Though not publicly mentioned as an agenda item by YRC, it seems doubtful the hours will pass without the impact of the A BF-Teamster contract being discussed. That will add another log to the pile of challenges facing Welch. As the source remarked, "there seems to be no end to [YRC's] problems."
Members of the International Brotherhood of Teamsters' ABF master negotiating committee Oct. 30 accepted ABF Freight System Inc.'s last proposal for the only unapproved supplement to the national master freight agreement after members covered by the Central Region Local Cartage Agreement voted not to authorize a strike, the union announced.
Approval of the last of 27 supplements paves the way for implementation of the master five-year agreement, which covers about 7,500 drivers, dockworkers, mechanics and clerical staff. The agreement, which provides a 7 percent wage reduction, takes effect Nov. 3 and expires .
After the Central Regional Local Cartage Supplement, which covers nearly 1,900 drivers, dock workers and other employees throughout the Midwest, was twice rejected, IBT conducted a strike authorization vote among the members covered by the unapproved supplement. When the ballots were counted Oct. 29, about 70 percent of members who voted declined to authorize a strike, the union said. In such situations the IBT constitution allows the master negotiating committee to accept the company's final offer, the union said.
“We have now arrived at a point where, simply put, there is nothing left to negotiate with this employer and no desire for a strike in the Central Region, based on the vote we received [Oct. 29] from the affected membership,” Gordon Sweeton, a co-chairman of the Teamsters National Freight Industry Negotiating Committee, said in the union's statement. “The responsible course of action is to finalize the agreement.”
Agreement Contains 27 Riders
The Teamsters and ABF, based in Fort Smith, Ark., announced that a majority of IBT members covered by the national master freight agreement voted in favor of ratification.
ABF said in an Oct. 30 statement that 26 out of 27 area supplements were ratified by mid-October. But IBT procedures required that all of the supplemental agreements, or riders, be approved before the national master freight agreement could take effect.
The Central Region Local Cartage supplemental agreement covers about 1,900 drivers, dock workers and other employees in Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin and one terminal in West Virginia. Cartage workers generally transport goods on docks.
Ken Paff, co-founder and current national organizer of Teamsters for a Democratic Union, a union splinter group, told Bloomberg BNA Oct. 10 that Central Region Local Cartage members had rejected the contract twice because they wanted the union to bargain some more for them. At the time, he said, the international union decided to conduct a strike vote, “although [the Teamsters] have not presented to the members any issues they would be striking for. It appears they simply want to wrap this up.”
Judy R. McReynolds, the president and chief executive officer of Arkansas Best Corp., ABF Freight's parent company, said in the company's Oct. 30 statement that the new agreement “follows several years of sacrifice from our non-union employees.”
“As the transportation and logistics market continues to rapidly evolve,” she added, “we are grateful that our union employees have also recognized the need for ABF Freight to operate much more efficiently so that we can better serve our customers every day.”
Economic Relief for ABF
The master agreement contains a 7 percent wage reduction, but the Teamsters said “with incremental annual wage increases” the reduction will be recouped over the life of the agreement.
Under the new contract, new hires have a one-year-longer wage progression. Hourly and mileage rates will increase 2 percent on in 2014, 2015 and 2016.
On , wages will increase 2.5 percent, raising rates above current levels.
A profit-sharing bonus of 1 percent of W-2 earnings will be issued in years when the operating ratio is 96 or below, 2 percent if 95 or below, and 3 percent if 93 and below.
The cost-of-living allowance will be modified by limiting an increase only to when inflation is in excess of 3.5 percent annually. The annual payment is capped at five cents per hour. According to IBT, the current COLA clause has paid just 10 cents over the past decade because inflation has been so moderate.
Another provision for direct economic relief for ABF is a reduction in paid leave. Beginning in 2014, employees will accrue paid vacation at a lower rate that will reduce annual paid vacation leave by one week.
Under the contract, cuts in wages and benefits will be equal both for employees with union representation and those without representation.
If ABF files for bankruptcy or is sold, the Teamsters national freight industry negotiating committee can terminate the wage reduction. The contract also stipulates that amounts the company saves through wage reductions will be applied to purchases of new freight equipment. No bargaining unit work can be transferred to other trucking companies unless the labor agreement authorizes it.
“The agreement does require the company to continue to participate in the same health, welfare and pension programs,” the union said, “and provides for contribution increases in order to maintain benefit levels retroactive to .”
ABF said in its Oct. 30 statement that wage reductions for employees covered by the contract would take effect during the week of Nov. 3. It also confirmed that increases to workers' health, welfare and pension benefits would be retroactive to Aug. 1, 2013.
IBT's Sweeton said, “We believe that this agreement helps protect our members' health, welfare and pension benefits and will also give the company the ability to compete in a very tough trucking environment, which is good for ABF and the long-term job security of our members.”
According to ABF, the ratified master agreement “achieves the company's stated goals of putting ABF Freight on a path to profitability by allowing the company to reduce costs and become more competitive, while preserving the best-paying jobs in the freight industry for ABF employees” represented by the Teamsters.
Company to Save $55 Million to $65 Million Annually
ABF officials estimated that the labor agreement would lead to an estimated net savings of between $55 million to $65 million on an annualized basis.
The company said the savings would be generated by “wage and vacation reductions and from work-rule and flexibility components of the contract.”
Roy Slagle, ABF's president and chief executive officer, described the new agreement as “a significant step for our company.”