ABF and Teamsters reach a five-year tentative agreement

A little more than a month after ABF Freight System, the seventh-largest less-than-truckload (LTL) carrier by revenue, and the International Brotherhood of Teamsters said they secured a 30-day extension for the National Master Freight Agreement, ABF said on Friday that the ABF and Teamsters negotiating teams have reached a tentative agreement on a contract for the next five years.

ABF officials said in a statement that this agreement “is in the best interests of ABF union employees and meets our stated goals to:
-maintain the best-paying jobs in the freight industry;
-stay in our current pension funds;
-ensure our employees have great benefits;
-adapt to the changing needs of our customers;
-put ABF on a path to profitability to secure jobs and retirement benefits for now and in the future”

Specific details of the agreement were not made available by ABF, but they said would be forthcoming.

“In the interim, we will continue to serve our customers in the fast and efficient way manner they have come to expect from ABF, as it will remain business as usual through the ratification process.”

In March, Teamsters for a Democratic Union, the dissident wing of the 1.4 million member union, said in an online note to its members said that bargaining continues “with the company in the driver’s seat, focusing on concessions being demanded by management on operations, unbalanced freight lanes, and more,” adding that supplemental bargaining has proceeded also.

“Bargaining on economics (wages, pensions, health and welfare) has apparently not taken center stage yet,” TDU said in a statement.

TDU added that in a conference call with local union leaders in late March, IBT International vice president Gordon Sweeton and IBT staffers stated that the company needs relief.

In December, union locals representing 7,500 drivers, dockworkers, mechanics, and clerical staffers at ABF asked the carrier for a two-year contract with healthy wage and benefit increases.

As previously reported, Teamsters locals are asking ABF for $1-per hour wage increases and additional contributions to their pension, health and benefit package.

The company has already asked that it negotiate separately from chief union rival YRC Worldwide, which has been revived financially under new President and CEO James Welch.

After breaking away from chief rival YRC Worldwide in an attempt to negotiate separately with the Teamsters National Freight Industry Negotiating Committee (TNFINC), ABF made an initial contract offer that the union says insulted ABF’s 7,500 drivers, dockworkers, mechanics and clerical staff.

The Teamsters immediately responded with a press release that called that initial offer insulting and a “non-starter.”
 
A second round of negotiations in Kansas City starting Jan. 7 did not fare much better, according to the head of the Teamsters freight negotiating committee.
 
“ABF’s initial contract proposals ... seek to destroy the NMFA standards that have been in effect for decades and served ABF well,” Sweeton said in a press release.  “We hope the company will bargain in a traditional manner so that we can make progress on the important issues from the start.”
 
Among the initial demands by the carrier, ABF wanted to eliminate all supplemental agreements to the basic contract; reduce paid time off; eliminate the longstanding grievance procedures that have been in effect for more than half a century; expand use of nonunion subcontractors, expand use of worker surveillance; and create new, lower-paying part-time positions in most job classifications.
 
ABF has responded with details of its current financial plight. Its stock price has plummeted by more than 80 percent in the past two years to trading around $9 a share at press time. It says its high labor costs are responsible for more than $230 million in losses since 2009.
 
ABF says its goal is to secure a new contract that allows ABF to “substantially lower its costs, become more flexible and better compete in a rapidly changing marketplace” that has seen hundreds of union carriers go out of business and non-union carriers proliferate.

Last week, ABF reported that for the first quarter revenue at $520.7 million was up compared to $440.9 million a year ago, and that it incurred a net loss of $13.4 million compared to an $18.2 million loss for the first quarter of 2012. ABF said that gains in revenue and tonnage on the LTL side were offset by higher wage and benefit costs for its Teamsters employees.

Arkansas Best President and Chief Executive Officer Judy R. McReynolds said on the earnings call last week that the Teamsters have publicly recognized ABF’s need for relief, which is encouraging.

“The bargaining teams have already achieved tentative agreements on various workload and flexibility issues that in the past have hampered our ability to adapt rapidly and meet customer requirements,” she said. “At this stage, the bargaining teams have now turned to the economic proposals on wages help and welfare intention. We have proposed initial pay reductions to help lower our wage costs and request the contributions from Teamster employees to their health care coverage just as our nonunion people throughout the company already contribute. On the pension front, we have proposed the uniform contribution rates that would standardize our payments across the 25 plans in which we participate. Contract negotiations are frequently accompanied by a proliferation of rumors, which from time to time, we must address while still respecting the need to let the bargaining teams do their hard work out of the public eye.”

BB&T Capital Markets analyst Thom Albrecht wrote in a research note that while his firm believes any concessions are likely to be financially favorable to ABFS they are not without consequences.

“If workers are disgruntled, then work slow downs may occur, even though such workers have few comparable job alternatives,” he wrote. “Lost productivity cannot be ruled out. In addition,it is not clear to us if ABFS will shrink its terminal network, which remains bloated with 275 facilities. Average shipments per day per service center of ~65 are way below peers, who average 130 to 200 shipments a day.”