The Teamsters Are Not to Blame for YRC Wordwide's Current Desperation

Implications

YRC Worldwide has too much debt, has lost nearly $2 billion in the last nine quarters, is downsizing its network and has outdated work rules. Of all those shortcomings, probably only the latter can be blamed exclusively on the Teamsters' union. Yet an article in Today'sFinancialNews.com tries to blame all of YRC's shortcomings on its union, and very little to management's buying binge earlier in this decade that saddled the company with an unrealistic debt load.

Analysis

YRC Worldwide, the nation's largest trucking company by revenue, is facing a financial showdown with its consortium of bank lenders. It has a liquidity crisis that may cause it to file for bankruptcy or liquidation.

If it is lucky, YRC's consortium of lenders will continue to throw the company more financial rope. If it is lucky, its customers will continue to enjoy the deep discounts it is offering for its services. If it is lucky, the economic downturn will finally turn around and the company may survive.

But none of these circumstances would have happened without the cooperation and, yes, enlightened labor relations approach showed by its 50,000 Teamsters members and its president, James P. Hoffa, son of the legendary Teamsters leader.

The Teamsters have shown remarkable flexibility in helping YRC stay afloat. They have approved one wage giveback of 10 percent and probably are close to approving another 5 percent shave. These wage cutbacks are saving the company approximately $250 million a year.

Furthermore, and maybe more importantly to freight Teamsters whose average age is about 60, the Teamsters have OK'd a pension contribution freeze to allow YRC to remain financially viable. In the first quarter alone, that pension payment deferral was worth about $83 million.

Now that YRC's shares have sunk to about the buck-a-share level, a reporter, Andrew Snyder of Today'sFinancialNews.com, has written that all this is because of stubbornness by the union.

Mr. Snyder writes: "In YRC's case, the Teamsters are maintaining their infamous negotiating might and bargaining themselves right out of a job."

That is exactly, precisely, and stunningly, 100 percent wrong, Mr. Snyder.

In fact, Teamster flexibility and willingness to work with management are the only reasons this company is still afloat. Time after time when YRC officials have gone to the Teamsters asking for concessions, they have obtained them.

Now, I'm not going to go as far as saying the Teamsters have been blameless in other unionized trucking companies' demise. After all, more than 500,000 Teamsters jobs in the freight sector have disappeared since the industry was deregulated in 1980.

But those closings have nothing to do with YRC's current plight. YRC is in the trouble it is in because of its overwhelmingly high debt load.

David Ross of Stifel Nicolaus has estimated YRC has $1.427 billion of total debt, including $728 million to its group of bank lenders. Those banks have chosen to keep YRC alive.

That $1.427 billion of debt is perhaps three times as much as an $8 billion-a-year company such as YRC can afford in lean times such as this. It suffers under that debt load because of a pair of ill-timed acquisitions -- Roadway Express in 2003 for $1.1 billion and USF Corp. in 2005 for $1.2 billion -- highly leveraged acquisitions that have been costly to YRC in the long run.

The Teamsters didn't have a darn thing to do with deciding to make those acquisitions, Mr. Snyder. The decision to plunge ahead with those debt-laden acquisitions lies squarely with YRC's management, specifically its Chairman and CEO Bill Zollars.

Even Zollars has admitted publicly that the Teamsters have been helpful in giving the company flexibility to survive. Mr. Snyder is correct in labeling YRC as a "high-risk, speculative play" for investors. But it is high risk because of management's decisions, not labor's.

Press Releases Are Good. Facts Are Better. YRC Soldiers On.

Implications

YRC Worldwide, the nation's largest trucking company by revenue, issued a press release saying it has reached a tentative agreement with the Teamsters union over more concessions made by its 55,000 rank-and-file Teamsters. Exact details are not known, and were not disclosed. They are likely to include an additional 5 percent wage cut in addition to the 10 percent wage giveback the union agreed to back in April.

Analysis

Fighting financial wars on several fronts, beleaguered U.S. trucking giant YRC Worldwide says it has reached a tentative agreement with the Teamsters union regarding more concessions by rank-and-file workers aimed at keeping the $7 billion LTL company afloat.

Exact details were not released. It is believed the Teamsters agreed to an additional 5 percent wage giveback to go along with the 10 percent cut agreed to in April. That earlier cut was estimated to save the company as much as $250 million annual. So an additional 5 percent shave might save the company $100 to $125 million.

"The press release says nothing new," wrote David G. Ross, a respected analyst who tracks YRC Worldwide for Stifel Nicolaus, Baltimore.

Ross has been on top of this company. He estimates that YRC National (the old Roadway and Yellow networks) has suffered year-over-year freight volume tonnage losses of up to 40 percent. Its regional carriers (the only Holland and New Penn companies) are off more than 20 percent. Full Story......

Pact shields union jobs, reduces costs

New Penn Motor Express’ parent company has reached a tentative deal with the Teamsters that will reduce the firm’s expenses and protect union jobs.

YRC Worldwide Inc. and the International Brotherhood of Teamsters agreed to modify terms of their current labor agreement, according to statements from the company and union issued yesterday.

YRC’s stock price, which opened the day at a 52-week low, shot up on the news and closed at $1.49, an increase of $0.60, or 67 percent. The stock has traded between $0.89 and $22.52 during the past year.

Details of the agreement are expected to be released next week after further discussions with the union, news releases from YRC and the IBT said. The modified contract will be voted on by YRC employees who are represented by the Teamsters.

New Penn, a trucking firm based in South Lebanon Township, employs more than 2,000 people and operates a fleet of more than 750 tractors and 1,700 trailers.

YRC Worldwide, with headquarters in Overland Park, Kan., and 49,000 employees, is the holding company for a group of brands, including New Penn, Holland, YRC and YRC Logistics.

The Teamsters say the deal calls for “equal sacrifice” from workers and the company, according to The Associated Press. In earlier negotiations, the Teamsters expressed concern with issues they felt would affect them and not YRC. One of those issues was that YRC was asking to stop its pension contributions for 14months, which would save $500 million, but the workers would not have received anything in return.

“This is a tough situation for the company and our members,” Teamsters Freight Division Director Tyson Johnson said in a statement. “We are confident this tentative agreement balances the need to provide job security while maintaining good quality jobs.”

“We appreciate the ongoing willingness of the Teamsters leadership to work with the company to identify ways to improve the financial position of YRC Worldwide during this severe economic recession,” YRC President and Chief Operations Officer Mike Smid said in a release. “Our employees are the most dedicated and professional in the industry, and their continued loyalty to serving our customers remains unrivaled.”

In January, the 35,000 union members agreed to a 10 percent pay cut in exchange for a 15 percent stake in the company.

YRC has sold a number of its properties, including its corporate headquarters, to preserve liquidity and has made deals with creditors to stay within terms of its debt obligations.

YRC Worldwide Statement on Tentative Agreement with Teamsters

YRC Worldwide Inc. announced today that it has reached a tentative agreement with the International Brotherhood of Teamsters leadership to modify the terms of the current labor agreement for its employees covered by the National Master Freight Agreement. The proposed changes are designed to reduce the company's cost structure and preserve operating capital.

"We appreciate the ongoing willingness of the Teamsters leadership to work with the company to identify ways to improve the financial position of YRC Worldwide during this severe economic recession," said Mike Smid, President of YRC Inc. and Chief Operations Officer of YRC Worldwide. "Our employees are the most dedicated and professional in the industry, and their continued loyalty to serving our customers remains unrivaled."

Details surrounding the tentative agreement are expected to be available next week following further discussions with labor leadership. The modified agreement will be voted on by YRC Worldwide employees who are represented by the IBT.

TEAMSTERS AND YRCW REACH TENTATIVE AGREEMENT

The Teamsters National Freight Industry Negotiating Subcommittee announced today that a tentative agreement has been reached with YRCW that addresses the Company’s immediate cash concerns and long-term competitiveness while protecting Teamster members’ jobs and benefits once the company returns to profitability.

Details of the Tentative Agreement will be made available to the membership after being explained to Local Union leaders early next week.

“In the midst of the worst economic recession in our lifetime our Union negotiators have crafted a Tentative Agreement with YRCW that requires shared sacrifice while preserving good jobs and benefits for 35,000 YRCW workers and their families and tens of thousands Teamster retirees,” said James P. Hoffa, Teamsters General President.

“This is a tough situation for the company and our members,” said Tyson Johnson, Teamsters Freight Division Director and co-chairman of the TNFINC. “Our members should know our Freight leaders, Pension Fund trustees, Teamster staff and independent experts have worked tirelessly to evaluate the situation and develop a solution that protects our members and allows the company to survive the worst freight recession in several generations. We are confident this Tentative Agreement balances the need to provide job security while maintaining good quality jobs.”

“This Tentative Agreement should also send a message to the industry players who are slashing prices in an attempt to force YRCW out of business that YRCW will have the resources to be here for the long haul,” Johnson said.

YRC offers update on turnaround efforts

YRC Worldwide Inc. has been consulting with turnaround firms and financial advisers to help it come up with a plan for weathering the recession.

The Overland Park-based trucking company late Wednesday offered an update about its work to position itself to ride out the economic downturn. The release followed a trading day in which YRC stock prices plunged 28 percent to a 52-week low of 89 cents, compared with a previous low of $1.20. Also Wednesday, an analyst said bankruptcy remains likely for YRC in the near to midterm.

Several months ago, YRC said, it retained financial advisers that include Tenex Capital Management, Alvarez & Marsal and Rothschild Inc. to help form a “comprehensive strategic plan to address its capital structure and liquidity needs.” As part of that, Rothschild has started preliminary talks with several parties that hold significant portions of YRC’s debt securities.

Labor agreement negotiations with the International Brotherhood of Teamsters union are continuing and “remain productive,” the release said. The talks reportedly center around YRC ending its participation in union pension plans for 14 months, which would yield about $500 million in savings.

YRC also detailed other progress it has made in recent months, including integrating its Yellow and Roadway networks into YRC to cut costs, a bank agreement amendment that let YRC use $73 million in escrow funds from asset sales to pay down its revolving credit facility and progress on agreements to defer pension fund payments using company real estate as collateral. YRC reached an agreement to defer $83 million in second-quarter pension contribution payments with the largest pension fund in June; since then, seven other funds have entered the same agreement, bringing deferral of another $11 million in payments. YRC, which contributes to 36 multiemployer pension plans, still is in talks with the remaining funds.

“We can’t control the economic environment, but we certainly can and are controlling our response to it,” YRC Chairman and CEO Bill Zollars said in the release. “Our self-help recovery plan is proactive and has the support of our stakeholders. We are taking the steps needed to manage our plan today, and position our company for success as the economy recovers.”

If YRC fails, what happens to US truck sector?

The fortunes of a particular corner of the U.S. trucking industry in the next year are as tied to whether one company, YRC Worldwide Inc, survives as they are to a recovery in the recession-bound U.S. economy.

If YRC fails it could provide competitors with just the reduction in industry capacity they need to jack up pricing for the first time since late 2006.

While that would be good news for the less-than-truckload (LTL) market -- which refers to truckers who consolidate smaller loads into a single truck -- it will hurt customers already facing the pinch in a down economy.

YRC, based in Overland Park, Kansas, nearly quadrupled its revenue from $2.6 billion in 2002 to a peak of $9.9 billion in 2006 thanks largely to two major acquisitions, and is important because it controls some 20 percent of the LTL market.

"One of two things has to happen: either we have to lose capacity or demand has to come back," said Morgan Keegan analyst Art Hatfield. "The rate at which YRC's business is deteriorating makes it more likely that it will be them to go out of business rather than someone else."

He said a YRC failure "would have a positive effect on the market, as it would help restore the balance between supply and demand. It would also help stop the bleeding on pricing."

LTL shippers account for around 13.6 percent of America's trucking sector, with the rest dominated by the highly fragmented truckload -- or long-haul -- market. Full Story.......

2 New Penn drivers earn right to compete at National Truck Driving Championships

Two New Penn drivers won their classes at the Pennsylvania state truck driving championships over the weekend to earn the right to compete at the National Truck Driving Championships (NTDC).

Will Chrvala, of Reading, Pa., won the 4-axle class and received an award for having the highest score on the written test. Chrvala previously competed at the NTDC in 1992, 1993, 1995, 1997, 1998, 2001, 2002, 2004, 2005 and 2007.

From Camp Hill, Pa., Richard Walton placed first in the twin trailers class.
YRC drivers won the Pennsylvania team trophy, having two second- and one third-place finishes.

These YRC Worldwide drivers will represent their states and YRC at the 2009 National Truck Driving Championships from Aug. 17–22 in Pittsburgh.

YRC Worldwide, Teamsters will resume talks Wednesday

YRC Worldwide Inc. is set to resume face-to-face negotiations with its union on Wednesday as the two seek a way to help YRC maintain sufficient cash to continue operating.

A spokesman for the International Brotherhood of Teamsters confirmed Monday when the in-person talks would continue. Discussions, which began a week ago, are being held at the Teamsters’ Washington headquarters and by conference call.

Neither the company nor the union has disclosed the content of the negotiations.

Overland Park-based trucking company YRC which has roughly 49,000 employees — more than half of them union members — has been weighed down by debt and a lengthy freight recession, and lost $257.4 million in the first quarter. It has integrated subsidiaries, shut down facilities, laid off workers and sold property to try to cut costs and maintain liquidity.

Early this year, Teamsters members agreed to a 10 percent wage cut and suspension of cost-of-living adjustments through 2013 in exchange for a 15 percent stake in the company. YRC also has been negotiating to defer union pension fund payments using company real estate as collateral and on June 18 secured an agreement with the largest pension fund to defer $83 million in payments.

The union has said it also is reaching out to stakeholders — such as pension funds and YRC’s lenders — to address the cash issue.