Friday, June 22, 2007

Pensions dominate Teamsters’ talks with UPS, freight carriers

The good news for shippers following two separate current Teamsters union negotiations with UPS and a handful of less-than-truckload (LTL) carriers is there is scant chance of a national strike as happened 10 years ago when Teamsters walked out for 15 days against UPS and when they struck the LTL sector in 1994.

The bad news for shippers who like to stay abreast of these talks is these negotiations may be the most complex and complicated set of union contract negotiations since James R. Hoffa, father of the current Teamsters president, negotiated the first National Master Freight Agreement in 1957.

First, some basics. The UPS contract covering 246,000 Teamsters (79,000 full-time and 167,000 part-time) expires July 31, 2008. A separate contract covering an addition 65,000 Teamsters in the LTL sector (including 46,860 at YRC Worldwide and 9,372 at Arkansas Best) expires next March 31. A third set of negotiations covers about 125 Teamsters at a UPS Freight terminal in Indianapolis, but that likely will not be finalized until after the main UPS contract is negotiated.

Wages are not really the major issue in these talks. Workers in both the small package and freight industries can more or less count on 30-to-40 cent hourly increases in each of what is expected to be a five- or six-year contract, according to sources on both the company and union sides.

A UPS Teamster today earns $27.27 an hour ($1,090 per week gross, plus an additional $467 in health, welfare and pension payments). A freight Teamster makes about $22.31 an hour ($892 per week, plus additional $267 in health, welfare and pension payments. UPS drivers will get another $1 an hour increase August 1, and $.60 hour fringe benefit increase also on August 1. UPS drivers earn roughly $5 more per hour than a comparable city driver for a freight carrier. In August, that rises to $6 more.

What makes this set of negotiations so complicated can be covered in one word – pensions. Or, specifically, pension withdrawal liability.

Currently, about 60 cents of every dollar that UPS contributes to pensions goes to fund pensions of retirees of other companies.

UPS and the freight carriers belong to scores of multiemployer pension plans. Because of the decline in unionized carriers and the more than 600 closings of Teamsters-covered carriers in the freight industry since the Motor Carrier Act of 1980 deregulated trucking, the remaining carriers (namely UPS, YRC Worldwide, Arkansas Best and a handful of smaller carriers) are liable for literally billions of dollars in unfunded pension withdrawal liability.

Herve Aitken, a transportation attorney who specializes in trucking pension issues, has estimated that the Central States pension plan, the largest of all the Teamsters plans, has a calculated liability of more than $14 billion. Other estimates run as high as $20 billion—and rising. The lion’s share of such liability falls to companies such as UPS and YRC

“It’s a function of demographics,” Aitken says, noting the average age of a Teamster in the freight sector is nearly 60. “Underfunding on the multiemployer side is only going to get worse.”

That’s because there are only about 155,000 active participants in the Central States plan (down from nearly 190,000 in 2001) while there are about 295,000 beneficiaries (up from 275,000 in 2001). See adjacent chart.

Because such underfunding creates such uncertainty, banks and other investors look at such liability with disdain and it becomes a deal-killer for any acquisition-minded third party. That’s why UPS and Arkansas Best (and perhaps YRC) are looking to make a one-time payment to exit such multiemployer funds and instead take control of them through a joint agreement with the Teamsters. Others agree.

“We strongly believe UPS and its employees would be far better off if it were able to exit the Central States plan,” Bill Fisher, managing director with Raymond James & Associates, wrote in a recent analysis of Teamsters multiemployer pension plans.

According to internal estimates, it would cost UPS about $4 billion to exit these multiemployer funds. UPS, a $47 billion company with plenty of free cash, has that money. One UPS source said the company would make up that $4 billion in savings within four years. YRC’s withdrawal liability is estimated to be close to $4 billion as well. But that company does not have nearly the cash reserve as UPS, and it would have to amortize that amount over 20 years.

Arkansas Best President and CEO Robert Davidson already has said he wants out from the withdrawal liability, and would be willing to spend the $650 million to do so, provided those payments could be spread over 20 years.

The union has not rejected any of these proposals out of hand. Ken Hall, director of the Teamsters parcel and small package division that negotiates with UPS, has called the UPS deal “a serious proposal that has to be seriously negotiated.” That’s a far cry from the union’s stance in 1997 when UPS offered basically the same deal, and it resulted in a 15-day national work stoppage. But that was when Ron Carey was running the 1.3 million-member Teamsters now run by James P. Hoffa. The union has never had a national strike in transportation under the younger Hoffa.

Thursday, June 21, 2007

Teamsters, Allies Rally for the Employee Free Choice Act

Workers, Fellow Labor Unions, Organizations Demand Bill’s Passage

June 21, 2007

Some 3,000 workers, labor leaders and elected national representatives rallied outside the Capitol Building in Washington, D.C. Tuesday in support of the Employee Free Choice Act, or EFCA. The bill is expected to be introduced in the Senate as early as this week.

“We’re here to ensure the passage of the Employee Free Choice Act,” said James Hoffa, Teamsters General President. “Today, there are 60 million people across the country who want to join a union but are frightened to do so. With EFCA, these workers’ rights will be protected.”

Speakers included workers illegally fired for attempting to build unions in their workplace, leaders of labor unions and organizations dedicated to building the middle class, and elected officials, including Sen. Ted Kennedy (D-MA), Sen. Chuck Schumer (D-NY), Rep. George Miller (D-CA), Sen. Joe Biden (D-DE), Sen. Dick Durbin (D-IL) and Sen. Sherrod Brown (D-OH).

“At a time when employers are breaking the law, every person needs EFCA,” said Roger Hickey, Co-Director of the Campaign for America’s Future. “How did Americans get Social Security? How did we get eight-hour workdays and weekends? That’s right, unions.”

Introduced with bipartisan support, EFCA would take a giant step toward restoring the strength of the middle class and empowering the nation’s workers. The House of Representatives overwhelmingly passed this important piece of legislation on March 1.

“The majority of the Senate supports employers being fair to employees,” said Sen. Harry Reid (D-NV). “We need EFCA.”

“I don’t have to tell you that unions are essential to the middle class,” said Sen. Hillary Clinton (D-NY). “We need to strengthen workers’ right to organize, their right to get that first contract.”

The Importance of EFCA

Under current labor law, after workers express their desire to form a union, they usually endure a nasty, bruising and lawyer-dominated election process as the employer fights to block its employees’ choice, often employing illegal tactics such as firing workers.

With EFCA, if a majority at a workplace wants to build a union, they sign cards and the employer recognizes their wishes. Negotiations for a labor contract begin soon after. EFCA would put democracy back in the workplace and protect workers from the abuses of anti-union employers.

“CEOs or major corporations are sending our jobs overseas,” said Sen. Bernie Sanders (D-VT). “We need to strengthen the trade union movement so the middle class grows. We are going to fight so every worker in this country who wants to join a union is free to do so. That’s what EFCA is going to do.”

“We believe this fight is about the freedom of association, allowing workers to organize to control their destinies,” said William McNary, President of US Action. “We believe that all workers deserve livable jobs that provide good wages, fair health care and secure retirement.”

A 2005 study by the University of Illinois at Chicago found that 30 percent of employers fire pro-union workers; 49 percent of employers threaten to close a worksite when workers try to unionize; 82 percent of employers hire union-busting consultants to fight organizing drives; and 91 percent of employers force employees to attend anti-union meetings one-on-one with supervisors.

“Today we have a war on the middle class,” Hoffa said. “The way to correct it is EFCA: You sign a card, you’ve got a union.”

Teamsters say Bush administration defying Congress over Mexico trucking

Teamsters General President James P. Hoffa lambasted the Bush administration today for planning to defy Congress and the American people by rushing ahead with its reckless cross-border pilot program.

Hoffa spoke at a news conference on Capitol Hill with members of Congress and truck safety advocates. They issued a study showing how the Bush administration is dodging truck safety requirements in its zeal to open the border to unsafe Mexican trucks.

“George Bush is trying to do as much damage to this country as he can before he leaves office,” Hoffa said.

The Bush administration has said it will ignore Congress and instead rely on the Mexican government to ensure the safety of Mexican trucks traveling freely along our highways, Hoffa said.

Hoffa pointed out that the Transportation Department admits Mexico doesn’t have drug testing facilities. He also said the inspector general says DOT can’t trust its own database to flag Mexican truck drivers with traffic convictions.

“It’s no secret that it’s easy for an unqualified driver to get a Mexican driver’s license,” Hoffa said.

The group also released a poll showing a clear majority—57 percent—of the American people disapprove of allowing unsafe Mexican trucks to travel beyond the current commercial zones.

“The Bush administration is brazenly ignoring the will of the American people by planning to open our highways to Mexican trucks,” Hoffa said.

Hoffa was joined by Sen. Byron Dorgan, D-N.D., Rep. Peter DeFazio, D-Ore., Rep. Nancy Boyda, D-Kan., Rep. Duncan Hunter, R-Calif., Joan Claybrook of Public Citizen, Jackie Gillan of Advocates for Highway and Auto Safety and Josh Ulibarri, of Lake Research.

Tuesday, June 19, 2007

YRC Worldwide falls on Wachovia analyst’s downgrade

Shares of Overland Park-based transportation giant YRC Worldwide Inc. were down almost 2 percent in premarket trading today after a Wachvoia Securities analyst downloaded the trucker’s shares.

Wachovia analyst Justin B. Yagerman downgraded YRC Worldwide, which operates in the less-than-truckload sector, to “market perform” from “outperform.”

In premarket trading, YRC shares were down 72 cents, or 1.86 percent, at $37.95 after closing at $38.67 Monday on the Nasdaq.

On Friday, Stifel, Nicolaus & Co. analyst John G. Larkin lowered his second-quarter earnings per share estimate for YRC from $ to 87 cents.

Yagerman said the full-truckload hauling sector is likely to recover faster than the less-than-truckload sector.

He upgraded Knight Transportation Inc. and Werner Enterprises Inc. to “outperform” from “market perform.”

He said he expects improvement in freight because the weak dollar will drive exports as buyers in other countries use their stronger currencies to buy more U.S. goods. Plus, retailers and manufacturers will ship more once they clear their overstocked inventories.