YRCW chief says company intends to counter-sue ABF Freight Systems

Earlier this month, less-than-truckload (LTL) services provider ABF Freight Systems signaled its intent to take legal action against the International Brotherhood of Teamsters, various subsidiaries of YRC Worldwide and other entities, following a ratified labor agreement by YRCW Teamsters members.

ABFS said the reason for taking legal action is on the grounds that these organizations are violating the National Master Freight Agreement, which serves as the collective bargaining agreement for the majority of U.S.-based trucking employees.

As LM previously reported, YRCW’s agreement, which is the third one its Teamster members have ratified going back to 2008, extends its previous agreement with the Teamsters that was slated to expire in 2013 to March 31, 2015. The agreement is being viewed by several industry experts as core to its survival. Some of the key components of the deal include: resuming pension contributions on June 1, 2011 at a 25 percent contribution rate; revised union work rules, which is comprised of reduced vacation time, a flexible work week, and four-hour work classification; and a renewal of its expiring ABS facility, among others. YRCW expects this deal to save the company $350 million annually during the duration of the agreement.

But while the dust has barely settled on ABFS’ intention to take YRCW to court, a Dow Jones report stated that YRCW President, Chairman, and CEO Bill Zollars labeled this legal challenge by ABFS as “worthless,” adding that YRCW will likely counter-sue ABFS.

“We think the suit is completely without merit, and we’re approaching it on the basis that we defend ourselves here,” Zollars said in the Dow Jones report. Zollars also mentioned that ABFS is not a party to YRCW’s labor contract and the suit is “in direct contradiction to laws governing labor contracts.”

While YRCW may be on the path back to solid footing with this agreement, ABFS President and Chief Executive Officer Wesley Kemp blasted it, noting that the three rounds of concessions granted to YRCW are in violation of the NMFA that has been in effect since April 2008.

And the average annual savings of $350 million YRCW expects to receive through the expanded NMFA—assuming projected levels of business, employment, and costs during that period—included savings from pension contributions at a reduced 25 percent contribution rate compared to the full obligation rate that would resume in 2011 without this agreement, according to the late September 8-K.

“The NMFA applies equally to every company that signed it and quite simply, with these three amendments, it does not do that,” Kemp said in a statement. “We need a long-term, industry-wide solution that is fair to all NMFA parties. We have the obligation to our employees, to our customers and to Arkansas Best shareholders to enforce our rights under the NMFA and compete on the same playing field with our industry peers.”

In late May, ABFS’ roughly 8,000 Teamsters employees rejected an agreement with the Teamsters. This proposed agreement was comprised of 15 percent wage concessions and an “Earnings Plus” plan that pays union and non-union ABFS employees when the company’s operating ratio reaches certain levels for the duration of its NMFA, which expires on March 31, 2013. It also called for 15 percent reduction in mileage rates, with negotiated wage increases and cost of living adjustments, if any, would have remained in effect until the agreement expired.

Prior to this being rejected, ABF officials said it would provide the company to opportunity to adjust its cost structure to be more comparable with the LTL marketplace.

“There is no doubt that ABF should have been able to get concessions from the Teamsters,” said Satish Jindel, president of SJ Consulting, in a recent interview. “They should not have to be in ‘critical care’ before somebody sends doctors to help them, as they are not in a healthy state of affairs. “While their balance sheet is not at bad at YRCW’s, it does not mean they don’t need relief. If a Teamsters worker is willing to work for YRCW at the current rates they have, then they should be able to do the same for ABF at the same wages also, as well as the same concessions and pension agreements. The Teamsters should do what is right and put both the companies at par so that both survive. Otherwise they will put ABFS in a condition similar to that of YRCW and it will get worse.”

In separate news, a notice on the Teamsters Web site on November 17 stated that on November 10 the Teamsters National Freight Industry Negotiating Committee was told by YRCW that it was mailing “a change of operations” to local unions this week, which would affect several hundred Teamsters’ members in the U.S. and potentially close three of the four Teamster regional areas in which they operate.

As of the end of the third quarter, YRCW had 350 National service centers and nearly 130 Regional service centers. YRCW President Michael J. Smid during the company’s third quarter earnings call that YRCW may eventually shrink its number of service centers to slightly less than 300.

YRCW officials said in prepared comments that the facilities will be consolidated beginning in mid-December and will continue through mid-January.

“Employees affected will have the opportunity to follow the work to the new locations,” the officials said. “This is not a work reduction effort but an effort to create greater density moving to and from our delivery terminals.  It is a continuing effort to adjust the YRC network of terminals.  The effort should allow for greater density to some of the smaller economic areas and allow for improved transit times and overall service performance. We will still cover all current service areas direct through fewer local facilities.”

An LTL industry source whom declined to be identified said that reducing the number of terminals is concerning on multiple fronts.

“If I’m a shipper, I have to be concerned about this for two reasons,” the source said. “First, will this mean yet more disruption of service to my business if I’m using YRCW, and secondly, since this move essentially takes more capacity out of the industry, what does it mean for rates?  Seems like the only way they can go is up, especially if the economy shows a little strength next year.”