YRC, Teamsters float trial work rule balloons in advance of NMFA contract talks

YRC Worldwide, which controls the fourth- and eighth-largest LTL companies with its long-haul YRC Freight and YRC Regional units, is embarking on what could be a make-or-break contract with its 24,000 Teamsters union.

Because YRC has struggled to regain profitability following its decision to buy rival Roadway Express in a debt-laden $1.1 billion transaction in 2003, any significant change in either units’ wage structure or fringe benefits could trigger another downturn for the Overland Park, Kan.-based company.

Significantly, this year’s negotiations will mark the first for YRC under its new chairman, James Hoffman, as well as for Darren Hawkins, its CEO. YRC’s contract with the Teamsters expires March 31 but so far there is no whisper of a strike threat—nor should there be, many analysts are saying.

“To even suggest there’s a potential for a strike will be damaging to YRC,” Satish Jindel, principal of Pittsburgh-based SJ Consulting, which closely tracks the LTL industry, told LM. “They (YRC workers) might as well find other jobs. They might as well get in line at McDonald’s.”

In a sign of cooperation between union and management, the Teamsters and YRC recently agreed to a pair of 60-day driver pilot programs. One gives YRC the flexibility to use pickup and delivery drivers to work 70 hours over an 8-day period, and makes a 34-hour driver restart available for drivers at the units. YRC had capped pickup and delivery driver hours at 60 hours over a 7-day period.

The other pilots allow YRC workers without commercial driver licenses to make local, short-haul deliveries that in the past were handled by non-union third parties. Those unionized “non-CDL” drivers would earn $20.14 an hour, slightly less than the $22 hourly wage local pickup and delivery drivers make and significantly less than the approximately $30 hourly wage that YRC CDL-covered over-the-road drivers earn.

YRC is negotiating separately from ABF Freight System, the ArcBest Corp. subsidiary that negotiated and signed a five-year agreement with the Teamsters last May covering 8,000 workers in that company, the chief unionized long-haul competition to the YRC companies. ABF is the seventh-largest LTL company.

The five-year ABF agreement includes hourly wage increases ranging from 30 cents to 50 cents an hour each year for the duration of the contract as well as fringe benefit increases. The deal also included a signing bonus of $1,000 for ABF unionized workers.

Whether YRC will get the same type of economic deal depends largely on how shrewdly both sides negotiate. While ABF is mildly profitable, YRC companies are not. Both the regional and long-haul YRC units hover around break-even operational profit while the parent company loses a slight amount in most years because of its heavy debt load.

In 2017, the last full year for which YRC financials are available, the parent company lost $10.8 million on $4.89 billion revenue. In 2016, it posted $21.5 million earnings on $4.69 billion revenue.

Independent analysts say YRC needs to keep its wage base in check while focusing on modernizing its work rules with the union to give it enough operational flexibility to increase its profit.

“The company should agree to nominal increases in wages but seek flexibility in their work rules,” Jindel said.  “But I would advise the union that (antiquated) work rules do not protect jobs.  Giving concessions on work rules does not hurt (union) members.”

In an indication that the Teamsters are aware that unionized long-haul companies such as the YRC units and ABF are dinosaurs in the largely non-union long-haul trucking business, the union agreed to a new bonus program with ABF based on its profitability.

If ABF achieves an operating ratio of between 95.1 and 96.1 for any full year before the contract expires in March 2023, ABF Teamsters are eligible for a 1 percent annual bonus. If ABF’s OR is between 93.1 and 95.0, bonus is 2 percent. If it goes below 93 OR, ABF workers get a 3 percent annual bonus.

The current YRC-Teamsters contract was ratified in January 2014 with the threat of bankruptcy hanging over the company. YRC workers have been operating with a 15 percent give-back in wages that was negotiated prior to the Great Recession. YRC workers also are on the short end of a 75 percent cut in pension contributions. It is unlikely either of those concessions will be reversed in the new contract, according to sources.

Teamsters for a Democratic Union, ripped the pilot programs and said the real reason YRC cannot hire and retained qualified drivers are “the concessionary wages they currently pay. Raise the wages and drivers will work.”

In a sign of division within the union, Ernie Soehl, the chief of the Teamsters’ national freight division, disagreed with TDU. Soehl says the new programs are designed to “insource” work and increase earning opportunities for YRC Teamsters while reducing the amount of work performed by non-union parties. The programs should also help the two regional companies service freight in areas where they have trouble recruiting and retaining qualified drivers, Soehl said.