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Delay in NMFA supplements’ approval costing ABF parent millions

By John D. Schulz, Contributing Editor
September 10, 2013

The parent of financially ailing ABF Freight System, the nation’s sixth-largest LTL carrier, is losing several millions of dollars a week because of delays in approval of two “supplemental” agreements to its Teamsters’ National Master Freight Agreement.
 
The contract includes an immediate 7 percent wage reduction covering 7,000 ABF Teamsters that is restored by the fifth year of the contract. The overall agreement was narrowly approved by ABF Teamsters on June 27. But seven “local/area supplements” were again placed on the local ballots for approval.
 
Parent Arkansas Best Corp. said late in late August that only five of the seven supplements were approved after further negotiations and rank-and-file voting. Until supplemental agreements covering the Teamsters’ Central Region Local Cartage and the Western States Office Employees are approved, overall wage savings from the new contract will not start to be realized by ABF.
 
“The national master portion of the ABF National Master Freight Agreement has previously been approved, but will not take effect until the status of the two remaining supplements is resolved,” the Teamsters said in a statement.
 
Arkansas Best Corp. in a filing with the Securities and Exchange Commission, called the new five-year agreement “an important step to return ABF to its historic profitability, while preserving the best-paying jobs and benefits in the freight industry.”
 
ABF wants some of those jobs to be a little less well paid. Unionized rival YRC Worldwide is operating with an agreement that its 15,000 Teamsters are paid 15 percent less than the National Master Freight Agreement (NMFA) requires. That 15 percent wage cut amounts to about a $80 million savings annually for YRC, which has lost in excess of $2.6 billion since 2007.
 
Using that same calculus, ABF stands to save approximately $16.5 million annually from its 7 percent wage concession covering its 7,500 Teamsters. But those savings will not be realized until the final two supplemental agreements are approved. In this case, time literally is money.
 
Brad Delco, a trucking analyst with Little Rock, Ark.-based Stephens Inc., said in a note to investors that it might be mid-October before those final supplements are ratified. That could be a “best case scenario,” Delco noted.

Meanwhile, in another Teamsters supplemental negotiation affecting small package giant UPS, it appears both sides are making progress on health care details under terms of the master small-package agreement ratified last June. Under terms of the proposed deal, about half of UPS’s 245,000 small-package workers will move from a company-sponsored plan to a program known as “TeamCare.”
 
This would be co-administered by UPS and the union. Much of the same key benefits – no co-pay, very low deductibles – would remain. As with the ABF contract, the UPS master deal passed by a 53 percent margin, and voting on the supplemental health care proposal was expected to pass when it was due for a vote in late September, according to union sources.
 
At ABF, the LTL unit makes up more than 95 percent of parent Arkansas Best’s revenue. It suffered 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.

Teamsters at ABF probably have little choice but to accept the supplemental agreements. But time is on their side. For each day that the old supplemental agreements are in place, wage concessions cannot take place.
 
The largest supplement to the ABF agreement is the Central Region local cartage agreement covering 1,700 Teamsters at ABF. The other five supplements which were previously rejected were accepted in the second round of voting.
 
The IBT Constitution (Article XII, Section 2) provides that after two such rejections, “The master national negotiating committee shall return to the bargaining table and attempt to address the issues… in the event no new tentative agreement is reached, or if the members reject the new tentative agreement, the master committee shall conduct a strike authorization vote” in the supplemental area.
 
The dissident Teamsters for a Democratic Union are disappointed with IBT President James P. “Jim” Hoffa over his handling of the ABF contract, which TDU calls concessionary.
 
“Hoffa and the freight division’s game is to divide, discourage, and threaten members,” one TDU official said. “Maybe they can get a contract passed that way, but they cannot build Teamster power like this. They cannot organize…Hoffa wouldn’t recognize Teamster power if it stole his golf clubs.”
 
Meanwhile, on another front, ABF lost again in court against the Teamsters union and YRC Worldwide over a national freight contract. The U.S. Court of Appeals for the Eighth Circuit on Aug. 30 upheld a lower court ruling that dismissed a complaint filed by ABF, in which it alleged that concessions given to YRC by the union violated the NMFA.
 
This case began in 2010 when ABF claimed that YRC’s 15 percent pay cut was illegal under the NMFA because it did not cover ABF workers as well. ABF said in a statement that it was “disappointed” in the court’s ruling, but was weighing further legal action. It was unclear exactly what that legal action might be.
 
YRC said it had “anticipated this outcome” and was “pleased” with the court’s decision.

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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