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ABF signals intention to withdraw from National Master Freight Agreement

By John D. Schulz, Contributing Editor
August 22, 2012

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 (NMFA) and will negotiate a separate contract.
 
For ABF shippers, this could mean a break in rates if the nation’s sixth-largest LTL carrier can reduce its labor costs which it says 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 1970s, ABF is leaving YRC Worldwide as the only carrier of significant size in the agreement.
 
ABF and YRC have been at odds for the past five 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.
 
ABF wanted the same deal for its 7,000 Teamsters, but failed to convince its rank and file to go for it.

ABF recently lost a lawsuit against YRC, alleging violations of terms of the NMFA in negotiating three separate concessionary deals to help keep YRC afloat during the recession.
 
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 the company can be 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.
 
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 on June 20.
 
ABF had $1.73 billion revenue last year as the sixth-largest LTL. YRC National (long-haul) had $2.94 billion revenue and YRC Regional (short-haul) had $1.45 billion revenue, according to SJ Consulting, Pittsburgh.
 
McReynolds said ABF contributed $17,392 per employee for pension plan contributions last year, compared with an average contribution of $1,131 per employee by its key non-union competition.
 
The current five-year NMFA expires next March 31.

In a recent letter to Teamsters president James P. “Jim” Hoffa and Gordon Sweeton, head of the Teamsters dwindling freight division, ABF President and CEO Roy M. Slagle, ABF notified the union of its intention to pull out of the NMFA and negotiate a separate deal.

“We stand ready to meet and negotiate a new collective bargaining agreement (CBA) applicable only to ABF to replace the NMFA at its expiration,” the ABF letter says.
 
The company told the union that it was “prepared to commence negotiations at your earliest availability.” The Teamsters did not immediately respond. ABF officials did not elaborate beyond their letter.
 
Stock analysts and LTL competitors have long agreed that ABF is operating at a competitive disadvantage in the market place. The stock price of parent Arkansas Best Corp. was trading around $10.30 a share at press time. Its 52-week high was $27.44, nearly triple its current price. Before the 2008 financial crisis, ABC’s share price exceeded $45 per share.
 
“We believe better relative tonnage levels will not solve the problem of (ABF’s) profitability,” analyst Chris Wetherbee of Citi said in a note to investors. “It appears that a structural change in compensation and benefits to its Teamster workforce is necessary to better align costs with volumes…Without material progress (on compensation issues), Arkansas Best has structurally higher costs than its peers, stunting potential growth.”
 
Competing truckers agree. 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

image
John D. Schulz
Contributing Editor

John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. He is known to own the fattest Rolodex in the business, and 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. This wise Washington owl has performed and produced at some of the highest levels of journalism in his 40-year career, mostly as a Washington newsman.


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