Zollars leaving YRC in latest restructuring move
September 28, 2010
Financially ailing YRC Worldwide, which controls nearly 20 percent of the $26 billion LTL market, has won another round of concessions from the Teamsters union, pending a rank-and-file vote.
Details of the tentative agreement with the International Brotherhood of Teamsters are sketchy. But the company said it was designed to address the YRC’s “competitiveness, re-entry into multi-employer pension funds and progress toward long-term growth.”
Exact terms of the agreement were expected to be made available this week. The tentative agreement needs to be ratified by the 40,000 or so Teamsters working at YRC-related companies. The company is expected to seek that ratification by the end of October.
“As our business continues to improve, the implementation of this tentative agreement will allow us to continue to provide our customers with a comprehensive portfolio of services that is competitive and reliable,” Smid said in a statement.
Sources within the union are speculating that the new concessions might save YRC some $350 million a year. But as a sweetener to the union, the company might agree to resume some of its pension payments in 2011.
YRC already has lost in excess of $2.1 billion in the last three years, the most losses ever racked up by a trucking company. Last year, as the company fought for survival, YRC won concessions from its 40,000 or so Teamsters on a 15 percent wage give-back and an 18-month freeze on pension contributions. That pension freeze is due to expire next January.
If the pension freeze is lifted, that would cost YRC an estimated $30 million a month (or $360 million annually) in additional costs.
Those concessions already have saved the company an estimated $500 million at a time when it has cut it losses and is almost operating in the black. Those concessions have cost the typical YRC truck driver an estimated $12.10 an hour, or just over $25,000 a year, in both wage and benefit cuts, according to internal union documents. Drivers at YRC make approximately $56,000 a year, before any overtime and fringe benefits.
Teamsters officials said those cuts were necessary for the survival of YRC, which is highly leveraged in the wake of its purchases of long-haul rival Roadway Express (for $1.1 billion in 2003) and regional LTL giant USF Corp. (For $1.3 billion in 2005).
While the merger of the Roadway and USF companies into the YRC brand were manageable during the freight boom period of 2002-2006, the debt from those purchases began to weigh down YRC once the freight recession took hold in 2007. YRC has had to renegotiate several times the terms of its debt agreements with its major lenders, and concessions from the Teamsters were a key component of the company’s new lending agreements, analysts and union officials said.
“The recession continues to wreak havoc on the trucking industry and threatens our members’ jobs,” said Tyson Johnson, Teamsters freight division director and co-chairman of the union’s freight negotiating committee.
“Unfortunately, as workers all across the country know too well, the economy has not improved as quickly as we had hoped,” Johnson continued. “The sluggish economy and smaller customer base leaves us in a position today where we face very, very difficult decisions
The union described the tentative agreement with YRC as an importation “foundation for a comprehensive financial restructuring and a viable, sustainable company.”
Details of the tentative agreement will be made available to the membership after being reviewed with local union and pension fund leaders on Wednesday, September 29.
Apparently as part of the concession agreement, YRC Chairman and CEO Bill Zollars has agreed to step down after 11 years at the helm, effective upon completion of the plan. The company said it would seek a replacement from both within and outside YRC.
“I am particularly proud of all we, as an organization, have accomplished over the past two years,” Zollars said in a statement. “We have faced unprecedented challenges and had to deal with the most difficult economic environment our industry has ever experienced. I am especially grateful to my team and the many stakeholders who partnered with us to put the company on an operationally and financially stable path to recovery.”
YRC had pre-tax losses of $899 million last year, on top of a $1.15 billion loss in 2008. For the first six months of this year, YRC has narrowed its losses to $184 million, compared with a pre-tax loss of $672 million for the first six months of last year.
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