YRCW, Teamsters reach tentative terms on contract modifications; puts 15 percent ownership in employee hands
Jeff Berman, Group News Editor -- Logistics Management, 1/1/2009
OVERLAND PARK, Kan. — Details of a tentative agreement between freight transportation services provider YRC Worldwide Inc. (YRCW) and the International Brotherhood of Teamsters were released last month. The agreement, which focuses on modifying the current labor agreement for YRCW Teamsters employees covered by the National Master Freight Agreement, was reached on November 28.
This agreement would cover about 40,000 employees of YRCW subsidiaries Yellow Transportation, Roadway, USF Holland, and New Penn in various positions, including drivers, dockworkers, and clerical workers among others.
The main details of the proposed agreement include a ten percent reduction on all wages paid, including scheduled increases, and a suspension of cost of living increases. And in exchange for agreeing to a wage reduction, YRCW Teamsters employees would receive a 15 percent ownership stake in the company. YRCW Chairman, President, and CEO Bill Zollars said YRCW is working with its union partners to modify the terms of its labor contract in a way that allows it to be more competitive with non-union carriers and protect and sustain the financial help of its employees.
YRCW indicated the company would achieve $220-$250 million annually from these modifications, and a ratification vote on the proposed changes was scheduled for late December, with the modifications expected to take effect on Jan. 1, 2009, if approved. These modifications would also continue through the duration of the National Master Freight Agreement, which expires on March 31, 2013.
A research report by J.P. Morgan analyst Thomas Wadewitz indicated these changes are positive for YRCW, but he warned that challenges still remain during a difficult economic period.
“While risks remain considerable, actions taken by YRCW are increasing the likelihood that it makes it through the current downturn,” wrote Wadewitz. “[And] the cost savings are greater than we expected and they should provide a meaningful boost for YRCW in 2009.”
But even with a meaningful boost, Wadewitz said YRCW still faces a grim LTL market and very intense competitive pressures.
This thought was shared by Ed Wolfe, president of Wolfe Research. Wolfe said that while a wage concession represents a significant reduction in YRCW’s annual expenses, it’s likely to increase the risk of further price competition and potential further service-related tonnage declines as a result of continued poor employee morale.
While the dollar savings is highly significant in this challenging environment, Satish Jindel, president of Pittsburgh-based SJ Consulting, contends that with massive layoffs occurring on a daily basis across all industries, these modifications are likely to be viewed as a good thing by YRCW Teamster staffers.
“There may be some concern that employee equity in the company may create some delusion among current shareholders…it also ties the interests of the workers to the future success of the company,” said Jindel.
“To that extent, concerns about productivity and employee morale may not be all that bad. It would be one thing if this occurred in 2005 or 2006, but with what is happening now employees will feel better knowing they still have a job, which is better than the alternative.”
Jindel added that this agreement is indicative of how the Teamsters under President James Hoffa have shown a little more of a business-friendly approach to labor contract.
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