Skeptical YRC employees voting on five-year wage concession worth $100 million a year

Financially struggling YRC Worldwide, whose long-haul and regional units account for the second-largest LTL capacity in the country, is looking forward to the New Year for about 100 million reasons.
  
Ballots are going out Tuesday to about 26,000 Teamsters on continuation of a wage and pension concession package that will save the ailing carrier about $100 million annually. Results of the rank-and-file vote will be announced Jan. 8 and could go a long way in determining the future of 80-year-old YRC, which has lost in excess of $2.6 billion in the last decade.
  
It would extend givebacks won six years ago through March 31, 2019. They include a 15 percent wage concession from the National Master Freight Agreement, a 75 percent cut in pension contributions as well as additional fringe benefit cuts. It would include a one-time $750 ratification bonus that at least one long-time YRC employee says is not worth the other concessions.
  
Jimi Richards, 58, a 26-year veteran of YRC and line-haul driver for YRC Freight, said his gut feeling from discussions with fellow YRC Teamsters is that the concessionary package will not pass.
  
“I really hope there is a Plan B,” Richards, a 40-year industry veteran who said he started on the docks at Brown Transport, a defunct Teamster-covered Atlanta-based trucking company, told LM.
     
“It’s being rushed. It’s coming right at the holidays when it tugs on everybody’s heart strings,” said Richards, a member of Teamsters Local 728 in Atlanta. He said he hears a lot of unfavorable discussion about the proposal from fellow YRC employees, but is unsure whether that will transfer into enough “no” votes to reject the proposal.

“We’ll see if people vote the way they talk,” he said. “A lot of things are vague. YRC did not negotiate this with IBT. It’s just a proposal that went directly to the membership. There is a lot of complex language in this contract. The only way is to vote this down and sit down and negotiate something that is favorable to everyone.”
  
YRC Chairman and CEO James Welch could not disagree more with Richards’ assessment. For his part, Welch said over the weekend he is confident the package will be approved. He has said it is necessary to achieve long-term labor stability in order to restructure long-term debt that is strangling YRC.
 
YRC has more than $1.4 billion in debt coming due in the next 18 months. Welch has said YRC has more debt than the next seven largest publicly held LTL carriers combined. Most of that debt was incurred under previous CEO William Zollars, who engineered two billion-dollar purchases (Roadway Express and USF Corp.) that has stifled YRC’s profitability since.
  
Welch, who has virtually ruled out a Chapter 11 bankruptcy reorganization, said the new concessions are necessary to “gain additional operating flexibilities in areas such as the increased use of purchased transportation and utility employees, among others, and allows us to move forward with our effort to refinance the company’s balance sheet.”
  
Welch, who has been CEO for two years, has shed YRC non-core assets which led to an intense focus back on its core business — North American LTL.
  
“Now, with improved results, renewed focus on our people and our processes, and support from our single largest partner (27,000 Teamster employees), we are at the stage where we can finally address the bloated balance sheet that we inherited when we took over in July 2011,” Welch said in a statement.
  
“We have pursued a deliberate strategy to improve both our operations and our balance sheet, and we will constantly work to improve margins and returns for our investors. This agreement and our contemplated financings will be the final hurdle we need to clear to have a strong, stable business, which will provide great value for our stakeholders, job security for our employees and improved service for our customers,” added Welch.
  
Welch conducted a “tele-town hall” conference calls with more than 4,000 Teamster employees last Sunday, and company officials are visiting terminals in the coming weeks to answer questions about the potential agreement.  
  
“We appreciate the sacrifices that all of our employees and their families have made,” said Welch. “The good news is our proposed agreement will not cut current wages of existing employees or reduce their health and pension contributions, which were important considerations as we designed the proposal to cut costs and improve service in this competitive industry environment.” Welch stated.
  
Richards, the veteran YRC driver, said the latest concessions will cost him $122,000 in wages and benefits over the next five years. “They say there are no new wage cuts. But we’re extending the old wage concession of 15 percent and 75 percent of pension contributions.”
  
Richards said he doesn’t dispute Welch’s assessment of the company’s financial future. But he said this proposal, coming after two earlier wage concession proposals that were approved by YRC Teamsters, is different in that the company never actually negotiated directly with the union. Instead, it simply issued a “memo of understanding” that two-man representatives from every local agreed to put to a rank-and file vote.
  
“When we had first the two votes, it was a matter of survival,” Richards told LM. “We’re not responsible for sins of prior management. This time is totally different. We’ve already given $3 billion in wages and concessions and pensions. Now they want more. A lot of guys don’t want to take that chance.
  
Richards ridiculed YRC’s $750 signing bonus. “If you get a 35 cent a hour raise, which is usually what we got, that’s over $800 a year not including overtime. Folks just feel that is not acceptable.”
  
For their part, YRC officials admit their workers are being placed in a difficult position. But they maintain this latest concessionary package is necessary for the survival of the company.
  
“It has not been without its challenges, but we are pleased with our refinancing progress to date and believe that with this agreement and resulting savings we will be able to not only deliver the balance sheet and extend our maturities, but will also be able to decrease our interest expense,” YRC Worldwide CFO Jamie Pierson said in a statement.
  
“With this agreement to vote in hand, we are now focusing on getting out to the front lines where the real work occurs and communicating with our hardworking men and women about why this new proposed agreement is critical to our company’s future. The foundation of this company’s strength is the support of many stakeholders including our employees, lenders, shareholders and, most importantly, our customers,” added Pierson.
  
If Teamsters vote to approve the five-year labor deal, Pierson said that will enable YRC to retire more than 90 percent of long-term debt “through a range of potentially deleveraging options.”
  
In a separate development, YRC told the Securities and Exchange Commission that it plans to issue 3 million shares of common stock “at market offering” that could raise about $27 million. In the SEC filing, YRC said it will use the net proceeds from the offering to cover some of a $69.4 million debt payment that comes due on Feb. 15, and other purposes.