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ABF preps to negotiate its own deal with Teamsters

By John D. Schulz, Contributing Editor and Jeff Berman, Group News Editor
October 10, 2012

ABF Freight System, the nation’s sixth-largest less-than-truckload (LTL) carrier, and a subsidiary of Arkansas Best Corporation, said it plans to begin negotiations on a new collective bargaining agreement with the Teamsters National Freight Industry Negotiating Committee, the negotiating unit of the International Brotherhood of Teamsters, on December 18. 

This development follows a September announcement by ABF, when it announced plans to negotiate its next contract separately on behalf of its roughly 7,800 United States-based Teamsters employees, which includes road drivers, city drivers, dockworkers, mechanics, and clerical personnel.

In September, ABF informed the Teamsters it was pulling out of the National Master Freight Agreement, which expires on March 31, and negotiate a separate contract.

As previously reported by LM, 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.

“We look forward to working together with TNFINC to create an agreement for our future that allows ABF to be more competitive,” said Roy Slagle, ABF president and chief executive officer, in a statement. “Our goal is to reach an agreement that enables us to better compete in a rapidly changing freight transportation market on behalf of our customers, our employees and our shareholders.”

Stifel Nicolaus analyst David Ross explained in a September research note that 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,” ABF President and CEO Judy 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.”

About the Author

John D. Schulz, Contributing Editor and Jeff Berman, Group News Editor

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Article Topics

News · LTL · ABF Freight · Teamsters · All topics

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