ABF Freight going solo in Teamster negotiations

ABF Freight System going to negotiate its next agreement with the Teamsters union separately on behalf of its 7,000 unionized workers. Hundreds of thousands of ABF shippers should be watching closely as it will affect rates they pay for truck services.

By ·

ABF Freight System, the nation’s sixth-largest less-than-truckload (LTL) carrier, is going to negotiate its next agreement with the Teamsters union separately on behalf of its 7,000 unionized workers. Hundreds of thousands of ABF shippers should be watching closely as it will affect rates they pay for truck services.
 
Abandoning its longstanding commitment to a collective approach in bargaining with the Teamsters, financially ailing ABF Freight System has informed the union it is pulling out of the National Master Freight Agreement and will negotiate a separate contract. That contract expires next March 31.
 
For ABF shippers, this could mean a break in rates if the carrier can reduce its labor costs which analysts say are the highest in the industry.
 
In pulling out of the NMFA, a collective bargaining strategy that once covered as many as 600 trucking companies and 500,000 Teamsters back in the regulated era of the 1960s and 70s, ABF is leaving YRC Worldwide as the only carrier of significant size in the agreement.
 
In a related development, ABF says it will appeal an August decision by a U.S. District Court to dismiss its lawsuit against the Teamsters and YRC. The decision by U.S. District Court Judge for the Western District of Arkansas Susan Webber centers on what ABF says is preferential treatment for rival YRC in extracting wage and pension benefit concessions over the past four years.
 
ABF and YRC have been at odds for years. Their dispute began in 2008 when YRC negotiated a 15 percent wage differential and significantly lower health and pension contributions for its 15,000 or so Teamsters.
 
YRC has lost in excess of $2.4 billion in the last six years. But thanks to significant concessions made by the union, it is posting a small operating profit now. New CEO James Welch is hoping to get YRC in the black by the end of the year.
 
By comparison, ABF is losing market share and money. Judy McReynolds, president and CEO of ABF parent Arkansas Best Corp., recently testified before Congress and said ABF needs a lower labor structure in order to compete.
 
Through August, ABF revenue was down 0.5 percent year over year. Modest yield increases were offset by tonnage declines. ABF said its operating ratio (OR) should not be better than the 98.3 it posted in the second quarter.
 
That stagnant OR was “unusual from a seasonality standpoint,” according to David Ross, trucking analyst for Stifel Nicolaus, which is maintaining a buy rating on parent Arkansas Best Corp.
 
Ross explained the key to ABF’s success is more about its ability to win concessions from the Teamsters than it is about freight volume.  Ross said ABF has a “significant upside” if it is able to negotiate a more favorable contract with the Teamsters union, which he says has “severely wounded” ABF in the past few years.
 
ABF has the highest labor costs in the industry, Ross said. Labor accounts for about 60 percent of ABF’s total costs, higher than any competitor. Plus, the so-so economy has hurt the company, ABF officials say.
 
“Definitely the overall economy is one of the biggest market drivers affecting the industry,” Jim Keenan, ABF vice president of sales and market, told LM recently. “LTL companies are just now healing from the wounds inflicted during the great recession, and economic projections for the near term appear less than stellar.”
   
ABF had a 5.5 percent LTL market share in 2004, but that has shrunk to below 4 percent. “Unless multiemployer pension plan contributions are brought under control, ABF will continue to lose market share,” McReynolds told the House Committee on Education and Workforce this summer.
   
Stock analysts and LTL competitors have long agreed that ABF is operating at a competitive disadvantage in the market place. Doug Stotlar, president and CEO of $5.4 billion Con-way Inc., a major rival in the LTL sector, recently told LM that ABF “had a case” to go it alone in its negotiations with the Teamsters.
 
Stotlar called ABF “the most disadvantaged company in our industry,” adding it has all the costs of a unionized carrier, without the concessions to operating efficiently in the market place.
 
“They are getting bludgeoned,” Stotlar told LM. “They have a legitimate beef with the Teamsters.”
 
Now, ABF officials will take that beef directly to the union in face-to-face contract negotiations without having to convince YRC to go along with the deal as well.


About the Author

John D. Schulz
John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. John is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis.

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

ABF Freight · Less-Than-Truckload · LTL · All Topics
Latest Whitepaper
Reduce Order Processing Costs by 80%
Sales order automation software will seamlessly transform inbound emailed and printed purchase orders into electronic sales orders that can be automatically processed into your ERP system with 100% accuracy.
Download Today!
From the June 2016 Issue
In the wildly unstable ocean cargo carrier arena, three major consortia are fighting for market share, with some players simply hanging on for survival. Meanwhile, shippers may expect deployment shifts as a consequence of the Panama Canal expansion.
WMS Update: What do we need to run a WMS?
Supply Chain Software Convergence: Synchronization Realized
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Optimizing Global Transportation: How NVOCCs Can Use Technology to Operate More Profitably
Global transportation isn't getting any easier to manage, especially for non-vessel operating common carriers (NVOCCs). Faced with uncertainties like surcharges—but needing to remain competitive when bidding against other providers—NVOCCs need the right mix of historical data, data intelligence, and technology support to make quick and effective decisions. During this webcast you'll learn how Bolloré Transport & Logistics was able to streamline its global logistics and automate contract management.
Register Today!
EDITORS' PICKS
Details Key to Cross-border Ease
Ever-changing regulations are making it risky for U.S. companies engaged in cross-border trade...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo