YRC Meeting With Teamsters On Another Labor Proposal
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If the vote is not to your liking, then try again.
That could serve as the mindset for financially-ailing less-than-truckload (LTL) transportation services provider YRC Worldwide, as it announced yesterday that it is in discussions with the Teamsters to gauge “the next steps to move the company forward” on the heels of last week’s vote, which saw 61 percent of YRC’s 26,000 Teamsters members reject a five-year deal to continue 15 percent wage and benefit cuts.
As reported in LM, YRC CEO James L. Welch made the continuation of those wage cuts until 2019 the linchpin of his efforts to refinance as much as $1 billion in long-term debt. Most of that debt was incurred by a pair of billion-dollar purchases, Roadway Express (in 2003) and USF Corp. (in 2005), engineered by then-CEO William Zollars, who left the company in 2011. What’s more, as LM’s John Schulz reported last week, YRC’s financial noose is tightening as it is facing about $953 million in debt coming due in the next 15 months. It has a $69.4 million bond issue that matures on Feb. 15. It has $325.5 million of loans due in September and $556.7 million of loans and bonds maturing in March 2015. All told, YRC is operating with more debt than all the other publicly held LTL carriers combined.
“It is clear the Teamsters understand the urgency of the current situation,” said Welch in a statement. “Although the company must achieve operational costs savings in the agreement, we also understand that simply re-voting the same proposal is not an option. Over the past few days, many employees have reached out to me expressing concern about the future of the company and about how they could protect their jobs. While we are in discussions with the IBT to set the blueprint for the long-term future of the company, our drivers, dockworkers, account executives and customer service teams have been hard at work serving
YRC Teamsters had signed off on similar deals in recent years, when its union members approved a deal with 77 percent voting yes in January 2009, 58 percent in August 2009 and 62 percent in October 2010.
In a statement issued today, YRC Teamsters said: “We have told the company that we are willing to consider a modified proposal that would protect our members and enhance the company’s financial position, but that it must contain meaningful improvements over the last proposal.”
And when news of the vote came out, Welch said the following: “Despite the vote results, it is business as usual as we have approximately 15,000 trucks on the road today serving 250,000 customers. We will keep our customers, employees and stakeholders advised of our efforts.”
Jason Seidl, a trucking analyst with Cowen and Co., wrote in a recent research note that if YRC is able to avoid bankruptcy, “the uncertainty surrounding [its] financial position is enough to make customers concerned,” adding that “[m]any of them may already be exploring the option of redirecting at least some freight to other carriers. Most carriers should have contingency plans for taking on additional freight.”
Welch is blaming the timing of his pitch to Teamsters, who were being asked to extend a five-year wage cut just days before Christmas. Many Teamsters balked. Privately, some Teamsters chafed at what they viewed a take-it-or-leave-it approach to bargaining.
Welch cut his deal with the national Teamsters freight organizing committee. The committee recommended passage, but did not negotiate in the traditional sense, leading to the belief by many YRC employees they were not being fully consulted on the measure.
“Our members have sacrificed billions of dollars in wages and pension benefits over the past five years and yet the company has been unable to recover from the disastrous policies of the previous management,” Teamsters President James P. “Jim” Hoffa said in a statement.
Satish Jindel, principal of SJ Consulting, Pittsburgh, which closely tracks the LTL sector, said in a recent interview that YRC’s fate largely rests in the hands of shippers and employees.
“There are really four groups—employees, customers, banks and shareholders,” Jindel told LM. “The banks and shareholders will not save the company. Employees and shippers will.”
While Jindel says YRC faces an uphill fight, it is not impossible. He drew distinct differences between YRC’s plight and that of fellow unionized long-haul carrier Consolidated Freightways, which suddenly closed on Labor Day 2002 following years of losses. YRC has lost in excess of $3.1 billion since 2006.
“They have a rough road, and it has gotten more difficult for them,” Jindel said. “But they are not running out of money, like CF. Management is different. They will fight until the last person is left on the ship before they jump off.”
Jindel estimates YRC has approximately $250 million in cash and cash equivalents on hand. That’s enough to handle operational losses and debt payments for the next six to nine months. “But that will not save them going into 2015,” Jindel warned.
What is needed is a sound long-term refinancing of a lion’s share of that $1.3 billion in long-term debt, Jindel said.
Toward that end, Jindel is recommending YRC management focus its attention on shippers and employees first, then lenders and finally shareholders.
“Shareholders are absolutely not of any importance; they will not save the company,” Jindel said. “If management spends its attention on employees and shippers, they will have better ability make changes to win support of employees to reconsider what they are asking. If they spend time worrying about shareholders, like the previous management did, time will go by very fast.”
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