ABF officials ecstatic over $55-65 million annual savings in new Teamsters deal

It took a lot of blood, sweat and tears—not to mention many months of hard-nosed negotiations—but financially ailing ABF 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. 29 by 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.