ABF, Teamsters differ on contacts about concessions
The union representing drivers and terminal dockworkers at ABF Freight System is disputing a claim by the trucking company that the two sides are discussing revisions to the existing labor contract to put its costs on par with competitor YRC Worldwide after it won concessions this year in an effort to stave off liquidation.
ABF is trying to get a contract similar to the one YRC Worldwide negotiated with the International Brotherhood of Teamsters (IBT) in early September under which employees agreed to additional 5 percent wage cuts and allowed the company to put pension payments on hold for 18 months, ABF Chief Operating Officer Wesley R. Kemp told reporters last week at a press briefing held in conjunction with the Transcomp conference and Intermodal Expo in Anaheim, Calif.
In January, YRC workers agreed to a 10 percent wage cut in exchange for stock options amounting to 15 percent of the company. YRC expects to save $810 million to $900 million from the revised labor arrangement, including about $500 million for abatement of pension contributions.
'I'll tell you that we are also in dialogue with the Teamsters and hopefully we'll be able to reach an agreement that will level the playing field' with the motor carrier's primary competitor, Kemp said.
The move to defer YRC's pension obligation 'was just too much for us to ignore' and triggered ABF's talks with the Teamsters, he said.
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The Teamsters Freight Division issued a statement on Nov. 18, in response to a Journal of Commerce online story about Kemp's comments, denying that any contract talks have taken place with ABF.
'We are not having contract or concession discussions with the company,' National Freight Director Tyson Johnson said.
'In light of the statement released [last week] by the IBT, there's obviously a difference of opinion as to how one would characterize the communication that's taken place between ABF and the IBT concerning wage concessions. That being the case, it's likely best not to debate those semantics in a public forum. In the final analysis, the Teamsters and ABF have a common goal which is to grow business and jobs,' ABF spokesman Danny Loe said in a written statement.
ABF and YRC Worldwide's various subsidiaries are covered under a five-year umbrella labor deal called the National Master Freight Agreement concluded in 2008 with the Teamsters. The individual companies are allowed to work out amendments to the contract with the union.
Kemp said that the talks may be taking longer because ABF's proposal differs from YRC's in that employees would be offered the ability to participate in profit sharing plans rather than receive stock options.
'When you ask people to give cash out of their pocket, I think the best thing you can do is put cash back into it when the company starts earning sufficiently' after the economy recovers, Kemp said.
'I think we're making progress. I'm still optimistic that we'll be able to come to some accord,' he added.
A freeze on pension contributions would have a substantial impact on ABF's cash flow, but is less significant in dollar terms than YRC's deal because the company has fewer employees. Based on ABF's 2008 contribution of $220 million to a multi-employer pension fund, a rough pro rata estimate is that the company could save $330 million through a similar abatement of payments. Contributions are expected to increase for 2009.
The trucking industry has been hammered by the recession and fewer freight orders for almost three years, with companies reducing rates to keep business and experiencing losses or steep declines in profits.
ABF, the third largest less-than-truckload carrier in the United States, has noticed a slight increase in piece shipment tonnage during the past few months, Kemp said. Tonnage increased 5.8 percent from the second to third quarters, which helped improve operating margins by four points. But third quarter tonnage was still 10 percent less than the same period in 2008 and the company had an operating loss of $14 million compared with a $25 million profit a year ago. Tonnage was down 15 percent from January through Oct. 21, when parent company Arkansas Best reported earnings. Last year, operating profit was almost sliced in half to $48 million.
The company's strong balance sheet has enabled the Fort Smith, Ark.-based motor carrier to continue rolling out its regional services and stay in a good position for an economic recovery, he added.
'If this ends up being an endurance race we have a better chance than others,' he said in an allusion to YRC Worldwide's difficulties.
ABF has instituted a series of measures in the past year to control costs and is holding onto equipment longer than usual to ensure it has capacity available when the economy turns around or a competitor exits the industry, the executive said.
The motor carrier has trimmed 2,500 to 3,000 from its payroll since the freight industry peak in the summer of 2006 and now has about 9,000 employees. Its fleet of tractors has been trimmed by 10 to 15 percent during that period. The company has also reduced its trailer fleet.
The decision to delay trade-ins of used tractors is based on contingency planning for potential new business and the fact that vehicles are logging less wear and tear in a market with fewer required deliveries, according to Kemp.
ABF's typical trade cycle is three to four years for over-the-road Class 8 tractors, but the reduced mileage on the engines is allowing the company to extend their service, increasing the average age of the fleet from 18 months to two years, Kemp said. Many of the older trucks are put into service in local city operations.
Other encouraging signs for the LTL industry are three consecutive months of growth in the Purchasing Managers Index, which tends to translate into increased freight volumes, and pension reform legislation circulating on Capitol Hill that would allow companies to unload liabilities associated with multi-employer pension plans, Kemp said. ' Eric Kulisch