It took a lot of blood, sweat and tears—not to mention many months of hard-nosed negotiations—but financially ailingABF Freight System, the nation’s sixth-largest LTL carrier, has finalized a five-year deal with the Teamsters union that is projected to save the nation’s sixth-largest LTL carrier between $55 and $65 million annually.
The new contract, covering about 7,000 ABF employees, is now ratified and will take effect on Nov. 3, 2013 and run through March 31, 2018.
ABF’s National Master Freight Agreement had been ratified by a narrow margin last June 27.
But because of delays in approval of two “supplemental” agreements, ABF lost out on realizing more than $1 million a week in savings until now.
“On behalf of all of the people and customers who depend upon ABF Freight, we are pleased that this final step in our lengthy contract negotiation process is now complete,” ABF parent Arkansas Best President and CEO Judy R. McReynolds said in a statement.
McReynolds said the new ABF National Master Freight 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.
The contract implementation follows the failure of a strike authorization vote on Oct. 29by employees covered by the Central Region Local Cartage supplement. Some 26 of 27 supplements were ratified by Oct. 14.
Members of the Teamsters’ ABF National Negotiating Committee were polled following the failure of the strike vote authorization. About 70 percent of those voting rejected the strike vote, the Teamsters said. After that failure, the committee determined that the contract is now ratified. That paved the way for the Nov. 3 effective date of the national and all supplemental agreements.
The Teamsters said its Negotiating Committee did not come to this decision lightly. As national negotiating committee co-chairman Gordon Sweeton 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 yesterday from the affected membership. The responsible course of action is to finalize the agreement.”
Company officials said they were relieved the arduous labor negotiations were finally over, and they could begin to realize savings from the concessionary deal.
“This new labor agreement follows several years of sacrifice from our non-union employees,” McReynolds said. “As the transportation and logistics market continues to rapidly evolve, 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.”
While the new contract is a significant step toward restoring ABF to its historic profitability, ABF President and CEO Roy Slagle said, there is more work to be done in a highly competitive LTL marketplace.
“The implementation of our national five-year agreement is a significant step for our company and we are very pleased to move forward,” Slagle said. “However, this is just one of several initiatives that we are focused on as we continuously look for ways to improve the efficiency of national operations on behalf of our customers.”
At ABF, the 90-year-old LTL unit once made up more than 95 percent of parent Arkansas Best’s revenue. But McReynolds has led Arkansas Best on a road to diversification. Last year, Arkansas Best bought expedited (non-union) carrier Panther Expedited for $125 million to enter the lucrative same-day freight market. Because of that and other diversification moves, ABF this year will account for about 80 percent of Arkansas Best’s overall revenue.
So effectively, instead of competing in the stagnant $35 billion LTL market place, Arkansas Best has gained a foothold into a much larger $200 billion trucking and expedited freight market.
Arkansas Best reported an operating loss of $14.9 million on $1.09 billion revenue the first six months of this year, compared with an operating loss of $15.8 million on $951.4 million revenue for the first half of 2012. It had an $8.5 million net loss the first half of this year, compared with $6.3 million net loss the first half of last year.
Arkansas Best’s second quarter net income of $4.9 million was down 58.8 percent compared to the $11.8 million earned in the second quarter of 2012. But the second quarter 2012 net income included an $8 million tax benefit. Revenue during the quarter was $576.9 million, up from the $510.5 million during the second quarter of 2012
In 2012, the company posted a $7.7 million net loss, a sharp falloff from the $6.159 million net earnings in 2011.
The new labor agreement will result in an estimated net savings between $55 million to $65 million on an annualized basis, according to the company,. This estimate is net of the Aug. 1, 2013 union health, welfare and pension increase. Approximately 75 percent of that annualized amount will be reflected generally pro-rata, in monthly operating results beginning immediately, with the rest expected to be fully realized over the next 24 months.
Savings come from wage and vacation reductions and from work-rule and flexibility components of the contract, the company said. It added the exact amount of savings will depend on the actual level of productivity gains that ABF is able to achieve through those work-rule changes and flexibility components.
Wage reductions for Teamster employees are effective week of Nov. 3, 2013. Increases to health, welfare and pension (HW&P) will be retroactive to Aug. 1. Those accrued HW&P costs have been included in ABF’s third quarter 2013 financial results that will be reported on Nov. 11, the company said.
A local office of ABF Freight System employees represented by the International Brotherhood of Teamsters have rejected a move to strike and will continue to seek approval of a supplemental contract for the office.
According to the Teamsters, 77% of union members in the region voted, with 70% rejecting a the option to strike.
Teamsters officials will now "poll the ABF Master Negotiating Committee within the next 24 hours to determine whether to accept ABF's final offer on the last remaining open supplement."
A five-year contract between Fort Smith-based Arkansas Best – the parent company of ABF Freight – and the International Brotherhood of Teamsters was approved June 27, but some supplemental provisions were rejected. Officials with both sides negotiated the rejected provisions, and the seven "local/area supplements" were again placed on the local ballots for approval.
Only the Central Region Local Cartage supplement has not been approved.
The contract, once ratified by all local regions, will cover about 7,500 employees of ABF Freight System who are members of the union. Most of those workers are drivers. ABF is the largest subsidiary of Arkansas Best, a transportation holding company. The contract includes an immediate 7% wage reduction that is recovered by the fifth year of the contract. The company was also able to negotiate for flexibility in work schedules and work across job classifications. Most of those workers are drivers.
"ABF wishes to thank our customers for their patience and commitment to ABF during this long and complicated process, as many people on both sides of the table worked to ensure a stronger future for our company and our employees in a very competitive marketplace," noted a company statement issued late Tuesday (Oct. 29). "The company also recognizes and appreciates the sacrifices from our union and our non-union employees to put ABF on a better path to sustained profitability for years to come."
Members of the International Brotherhood of Teamsters are preparing to meet with company leadership from YRC Worldwide Inc. in Dallas, and the topic on everyone's mind is concessions.
Late on Monday, the Overland Park-based less-than-truckload carrier (Nasdaq: YRCW) sent out a statement calling Teamster leadership to meet in Dallas on Nov. 5. The statement said company leadership will be on hand to discuss the company's "recent performance, future prospects, corporate refinancing opportunities and the need to pro-actively align multiple stakeholders in advance of 2014 debt obligation deadlines."
The statement also pointed out the upcoming deadline for the current agreement between the company and the labor union that represents 25,000 of the company's 32,000 employees. That agreement, based on a series of concessions that cut Teamster wages and stopped pension payments, runs through March 2015. It saves YRC more than $350 million in labor costs annually.
Representatives of the Teamsters' national office in Washington, D.C., declined to comment on the situation. However, other members of the union think the meeting may touch on the topic.
Vic Terranella, president of Kansas City's Teamsters Local 41, who is going to the meeting in Dallas said he received official communication from the union on Tuesday announcing company leadership will be at the meeting to speak directly with local Teamster leadership. Otherwise, he said, he hasn't heard anything official.
There have been rumors swirling that YRC is looking to extend that current agreement for two more years through March 2017.
"But that's just talk on the streets," Terranella said.
Terranella said he doubts YRC will discuss concessions during the meeting, because he thinks the company would not begin negotiations by addressing the locals rather than the Teamster's National Freight Industry Negotiating Committee negotiators.
Ken Paff, the national organizer for Teamster dissident group Teamsters for a Democratic Union, said "insiders" informed him YRC is going to look for a five-year extension of current wage and pension freezes as part of a wider effort to refinance the company. That would extend the current agreement through March 2019.
Paff said he believes the meeting is being called so company leaders can "present their case" directly to the union. He said he thinks a five-year extension would be a "very hard sell."
Representatives of YRC were not immediately available to comment on whether or not further concessions will be discussed, or considered going forward.
The market has not reacted positively to the meeting call. Since the company made the announcement, the company's stock has fallen from $11.16 a share at close of market on Monday to less than $9.40 a share about an hour before close of market Tuesday.
October 29, 2013: On November 5, YRC execs will meet with the IBT Freight Division and all freight local unions to press for a contract extension, reportedly until 2019. Hoffa and the Freight Division have agreed to allow YRC to address local union officials in Dallas.
The meeting will come two days before YRC is expected to announce its third quarter results. The company is aiming to refinance its debt, and wants a long-term Teamster agreement in place to get bank financing.
Hoffa's appointee to YRC's Board of Directors, Harry Wilson, has been the point man in pushing for getting a contract extension in place.
A Yahoo Finance report is available here.
IBT Freight Division letter to locals is available here.
Key Development: FMCSA issues final rule codifying a previous announcement that the agency's requirement that commercial truck drivers take 30-minute breaks does not apply to short-haul drivers.
Next Steps: Rule takes effect Oct. 28, upon publication in the Federal Register.
The Transportation Department's Federal Motor Carrier Safety Administration has issued a final rule, scheduled for publication in the Oct. 28 Federal Register, codifying a previous announcement that clarified that the agency's December 2011 hours of service regulation does not apply to short-haul truck drivers.
FMCSA in December 2011 issued a final rule (76 Fed. Reg. 81,134) pertaining to the hours of services for commercial truck drivers, limiting driving time to 11 hours per day and requiring drivers to take a break of at least 30 minutes if more than eight hours have passed since the driver's last off-duty period.
The American Trucking Associations challenged the rule in court, claiming it would be burdensome and costly. In an Aug. 2 decision, the U.S. Court of Appeals for the District of Columbia Circuit upheld the rule, except for its provision requiring short-haul drivers to take 30-minute breaks, which it vacated (Am. Trucking Ass'ns v. FMCSA, 724 F.3d 243, 2013 BL 205678). In response, FMCSA in August announced it would cease enforcement of that provision.
The latest final rule says that drivers who are not subject to the 30-minute break requirement include drivers who operate within 100 miles of their “normal work reporting location,” whether or not they hold a commercial driver's license, as well as holders of non-commercial driver's licenses who operate within 150 miles of their normal work location.
The final rule also specifies that “because this final rule makes only the changes necessary to conform the hours-of-service (HOS) regulations to the Court's decision, FMCSA finds that notice and comment are both unnecessary and contrary to the public interest.”
The rule becomes effective upon publication.
One icon of American popular culture of the 1970s was the long-haul trucker, a free-range rebel in jeans and a Peterbilt hat. Think Burt Reynolds in Smokey and the Bandit, hauling a load of Coors beer eastward from Texas. Or Clint Eastwood (and his orangutan Clyde) in Every Which Way but Loose. Or of the truckers in the song "Convoy," tearing up their log sheets, triumphing over Smokey, and rockin' into the night. The reckless spirit of the American West firmly relocated itself from pioneer to cowboy to trucker, at least for a little while.
Fast-forward 30-some years: That untamed maverick is harder to find and the open road has gotten a lot less open. In one short generation, technology, from onboard computers to GPS systems, transformed truckers from free-range rebels to carefully monitored employees whose lives are a lot more like cubicle-bound office workers than the iconoclasts of yore.
In the days before GPS, a driver could, if he chose, take leisurely breaks at truck stops then make up the time by racing at 80 miles an hour down the highway, endangering himself, other motorists and company profits.
So most companies that had to get stuff across the country refused to take on the risk and hired freelance drivers who owned their own rigs. Owner-operators, the logic went, would be responsible because they had to account for the cost of wear and tear on their trucks—and the consequences of reckless endangerment. Or, at the very least, any screw ups would cost the driver, not the company.
But this situation of owner-operators hauling on a contract basis was less-than-ideal for companies. Drivers did little to help out with loading or unloading at the warehouse or taking care of special loads, something the company could ask drivers to do if they were full-time employees.
Along came better monitoring via onboard computers or GPS. This fundamentally changed the playing field. Companies could keep reckless behavior in check and benefit from more coordination and extra help at the warehouse. Companies dumped the freelance operators and once again hired their own. (A 2004 study confirms this.)
Call it a victory for the productivity-enhancing effects of information technology, and a loss of autonomy and independence of the trucker on the open road.
Gary Bojczak, who worked for a construction company in northern New Jersey, discovered the personal effects of these tradeoffs. Earlier this year, Bojczak got his 15 minutes of fame (and a $32,000 fine) for jamming the satellite signals of a newly installed air traffic control system at Newark Airport. Bojczak hadn’t procured his illegal GPS jammer for the purposes of disrupting civil aviation. He merely wanted to keep his boss from tracking his whereabouts at all times.
If workers aren't doing anything wrong, one might argue, they shouldn't mind being tracked.
And the benefits – at least for the company's bottom line – are being felt across many industries, particularly those involving tasks like stuffing envelopes or making telemarketing calls where performance can be monitored real-time. Increasingly sophisticated software is able to detect employee misbehavior even in the absence of direct monitoring by flagging suspicious patterns in, say, the drink and meal transactions of restaurant servers. (One recent study found that such surveillance technology increased restaurant revenues by 7%.)
But, perhaps, like Bajczak, we all feel entitled to our privacy and security, whatever our bosses might think, and the effects on productivity be damned.
And maybe – just maybe – workers might feel more empowered and motivated if left alone to do their jobs a little more often.
October 17, 2013: ABF Teamsters in the Central Region are voting on authorizing a strike, but it's a phony proposition. The International union has not put forth any issues or demands to strike for!
Instead, Hoffa and the Freight Division have simply denounced the Central Region members for voting No twice, and tried to divide other freight Teamsters against them.
The votes will be counted on October 29. The International union and ABF management plan to implement the 7 percent wage cut and other concessions at that time.
Meanwhile, YRC management is asking Hoffa for an extension to the concession contract. Hoffa's appointee to the YRC Board, Harry Wilson, is leading the charge for the company. No word yet on what the Hoffa administration will do.
Hoffa's administration has given up on freight and trucking, the backbone of Teamster power. We need to give up on them in the next IBT election, and rebuild Teamster power.
ABF Freight System, Inc., and the Teamsters have reached another contract extension through October 29, 2013, as the two parties work through the process for resolving the two remaining supplemental agreements to the ABF National Master Freight Agreement.
The national agreement was approved on June 27 by a majority of Teamster employees. As previously noted, the increases in contributions to health, welfare and pension plans that were supposed to begin August 1 will not take effect as scheduled until the two remaining supplemental agreements are resolved.
September 26, 2013: Yesterday the IBT Freight Division told local union officers that they will conduct a strike vote among ABF local cartage workers in the Central Region. Gordon Sweeton told local officers that ABF presented a "last, best, and final" offer for the Central Region, and the union has no choice but to conduct a strike vote, following the two earlier membership rejections.
Posing the vote as a strike authorization, rather than over a contract proposal, is designed to get the contract settled, because at this point members are more interested in contract improvements than in a strike. Sweeton emphasized that vote for strike authorization would do serious damage to ABF and the IBT will strongly urge against authorization. The vote total in the second rejection was 716 No to 562 Yes.
Sweeton also reported that the Freight Division had OK'd ABF to haul 300 loads out of Michigan, to Chicago, by a nonunion operator. That work has already started.
Sweeton stated that he thinks they can get a settlement in another rejected supplement, covering the Western office Teamsters.
Jeffrey A. Rogers, the president of YRC Freight, the long-haul unit of less-than-truckload (LTL) carrier YRC Worldwide Inc., was fired today, according to industry sources.
James L. Welch, YRC's CEO, has assumed responsibility for the unit, according to industry sources. Welch was unhappy with the pace of progress at the division and had become increasingly involved in the unit's affairs, according to industry sources.
The company is expected to make an announcement after the equity market closed at 4 pm Eastern time.
Rogers was named president of YRC Freight in September 2011 after three years running YRC's profitable Holland subsidiary. Prior to that, he served as chief financial officer of the YRC regional companies, which includes three in the U.S. and one in Canada.
Rogers was named to the YRC Freight post shortly after Welch assumed the reins at the parent company. At the time, YRC was struggling badly with much of its problems laid at the feet of the long-haul operation, which accounts for about 60 percent of the company's revenue. The long-haul unit is the amalgamation of the former Yellow Transportation and Roadway Express. Yellow bought Roadway in 2003 but in the past decade has struggled mightily to profitably integrate the two companies.
YRC Freight was believed to be making headway—albeit haltingly—under Rogers. In last year's fourth quarter, the unit's operating ratio—the ratio of revenues to expenses and a gauge of a transport company's efficiency and profitability—improved 600 basis points year-over-year to 97.3, the company's best fourth-quarter operating ratio in six years.
However, the unit posted a lower second-quarter revenue and a wider operating loss over the year-earlier quarter. Company executives attributed the declines to the impact of a major network realignment implemented in May, a period that coincided with an increase in traffic. As a result, operations and service quality were affected, the company said.