Harry Wilson Tapped By Teamsters To Rescue Ailing Trucking Company And Union Jobs

Harry Wilson, last year’s Republican candidate for state comptroller, made a name for himself by helping rescue General Motors from bankruptcy. Now, months after an election he narrowly lost, he has turned his attention from the vehicles to the drivers.

The International Brotherhood of Teamsters recently invited Wilson to help restructure the ailing trucking and freight company, YRC Worldwide, in what they billed as an effort to help save thousands of unionized jobs and prevent the company from going under.

One of the largest trucking companies in the country, YRC had racked up a sizeable debt in recent years, endangering over 20,000 union jobs, the Teamsters said. According to a source with knowledge of the agreement, the union reached out to Wilson the first week in January to devise a rescue. Full Story........

TEAMSTERS CALL FOR INDEPENDENT BOARD CHAIR AT FEDEX; URGE INVESTOR SUPPORT

Teamsters Cite FedEx’s Poor Performance, Oversight Failures

The International Brotherhood of Teamsters today asked shareholders of FedEx Corporation to support the union’s proposal for an independent board chairman at FedEx’s upcoming annual meeting.

In a letter to shareholders, Teamsters General Secretary-Treasurer C. Thomas Keegel said that Frederick W. Smith’s dual role as chairman and chief executive of FedEx has resulted in a CEO-dominated board incapable of providing the rigorous, independent oversight of management that investors require. FedEx’s annual meeting will be September 28 in Memphis, Tennessee.

“FedEx’s lack of independent board leadership, compromised board independence and effectiveness, chronic poor performance, excessive executive pay, and questionable business strategies underscore the urgent need for an independent chairman to lead FedEx’s board in holding management accountable and providing strategic oversight and guidance,” Keegel said.

FedEx has significantly underperformed in the trucking and shipping industries, the S&P 500 Index, and compared to direct competitor United Parcel Service Inc. on a one-year, three-year, and five-year total shareholder returns basis, according to data from The Corporate Library (TCL), a leading provider of independent corporate governance research and analysis. Meanwhile, Smith has raked in exorbitant pay, accruing more than $84 million over the past three fiscal years while shareholder value has fallen by 50.2 percent. Profits made on the exercise of stock option grants with no performance hurdles make up the bulk of Smith’s pay.

The letter also raised concerns that Smith’s controlling influence on a board that includes potentially conflicted and over-extended directors has led the board to rubber stamp an unlawful and unsustainable business model at the company’s second-highest revenue generating business segment, FedEx Ground, which has exposed the company to staggering legal and financial risks.

The FedEx Ground business model, which relies on the misclassification of employee drivers as “independent contractors,” has allowed FedEx to evade expenses like payroll taxes, overtime pay and benefits. Numerous state courts and government agencies have found that FedEx Ground’s contractor model is a sham and are looking to collect the money owed to workers and states. According to an August 2008 Bloomberg article, the pre-tax liability from unpaid payroll taxes alone could reach as high as $2.5 billion.

“Many FedEx shareholders have already joined our call for independent board leadership, with 34 percent of the vote by shareholders supporting the Teamsters’ independent board chairman proposal in 2008,” Keegel said. “We believe that now, more than ever, an independent chairman is necessary for the company to successfully navigate the extraordinary legal, regulatory, reputation- and recession-related challenges facing FedEx.”

YRC chief pulls back statements in letter to Teamsters

YRC Worldwide Inc. CEO Bill Zollars appears to be pulling back from recent comments that have sparked the ire of union workers.

The International Brotherhood of Teamsters on its Web site has posted a Tuesday letter from Zollars. In the letter, he apologizes for comments to the Kansas City Business Journal that nonunion workers probably would not take further compensation cuts, even if union workers agree to an extra 5 percent wage cut and the forfeiture of 18 months of pension payments, because current cuts had been extended and nonunion workers took more of a cut to health and benefits.

Teamsters members are voting on whether to accept the new concessions package, valued at $825 million.

“YRCW is committed to the principle of ‘equal sacrifice’ and will require that our nonunion employees take as much, if not more, cuts in wages and benefits” as outlined in the tentative concessions agreement, Zollars wrote.

The Teamsters had explained to members that the concessions package included provisions that nonunion employees would “have further adjustments made to their total compensation package to bring their total wage and benefit package in line with what reductions are proposed” in the concessions.

The Teamsters Web site said Zollars’ note was a response to a Monday letter from union General President James Hoffa demanding “an immediate clarification” about public statements that contradicted the tentative agreement. A Teamsters spokesman said the union wouldn’t comment beyond what it posted online.

Zollars also said in the letter that YRC was retracting a Monday announcement about extending its delivery services to homes and businesses through a partnership with Specialized Transportation Inc. (STI), forming YRC Residential Solutions.

“YRCW will not subcontract bargaining unit work to Specialized Transportation Inc. or any other company” in violation of union agreements, Zollars wrote. “We recognize that, with more than 8,000 Teamsters on lay-off, residential delivery work must be offered to the bargaining unit.”

The Overland Park-based trucking company (Nasdaq: YRCW) has laid off thousands, closed facilities, sold property, amended bank agreements and taken other steps to avoid bankruptcy amid a drawn-out freight recession.

IBT Readies Ratification Ballots for YRC Teamsters

Union employees could receive ballots on wage cuts, company offer by next week

Teamsters at YRC Worldwide’s motor carriers will begin to receive ballots as early as next week for a vote on a plan to steer the troubled carrier clear of bankruptcy.

If the process runs smoothly, YRC and the Teamsters could seal their deal as early as the first week of August.

The Teamsters union and the less-than-truckload carrier group agreed July 9 to swap wage and pension cuts for a greater union say in running the company. The agreement would save the company $45 million a month in 2009 and $50 million a month in 2010, totalling more than $800 million.

Actual savings would be higher, as the wage cuts would stay in place until the current contract expires in 2013.

The agreement would give the Teamsters a seat on YRC’s board of directors and the option to purchase up to 35 percent of the $9 billion company.

It also would allow the union to impose restrictions on future acquisitions, offshore labor and the use of YRC’s third-party logistics subsidiary.

In return, the Teamsters would accept a 15 percent wage cut for the life of their master contract, along with an 18 month cessation of contributions to union pension plans.

The ratification vote could be a tough fight for the company and the union. YRC Teamsters agreed to a 10 percent wage cut in January — this tacks another 5 percent.
The loss of the pension contributions may be the toughest pill to swallow, especially for older drivers near retirement age.

“I think it will pass, but not with as big a margin as the last vote,” one YRC driver familiar with the plan said. “A lot of guys are really concerned” about their pensions, but also about what would happen to the company if the plan were voted down.

The company’s union employees approved the first round of concessions earlier this year by a 72 percent majority.

Teamsters consider extra 5 percent YRC Worldwide pay cut

YRC Worldwide Inc.’s union members will weigh an extra 5 percent pay cut on top of losing their pension contributions for 18 months, the union said Tuesday.

Leaders of local units for the International Brotherhood of Teamsters overwhelmingly endorsed the tentative plan at a Tuesday meeting in Chicago, the union said.

If union-represented YRC workers vote for the plan, the union this year would have gained options for as much as 35 percent of outstanding shares in the Overland Park, Kan.-based trucking company. The current plan also would require all YRC employees to take similar cuts, gain the union a YRC board appointee and bring in a corporate turnaround expert.

YRC and the Teamsters have been negotiating since June 29 about concessions that would provide YRC with the cash necessary to survive the recession. They reached a tentative agreement July 9 but didn’t release details until Tuesday.

The 5 percent wage cut, which would be effective until the union labor agreement ends in 2013, would mean a 15 percent total cut in wages this year. Early this year, Teamsters members agreed to a 10 percent cut in exchange for a 15 percent stake in YRC. The cost-of-living adjustment also is suspended through the contract, according to a document distributed at the Chicago meeting.

YRC would end its participation in union pension plans from July 1 through Dec. 31, 2010, meaning members don’t accrue pension benefits during that time. The company would have to resume participation and payments on Jan. 1, 2011. The move reportedly would save $500 million.

According to the document, YRC agreed to Teamsters demands that included gaining an appointee to the board, bringing in a turnaround consultant, offering the opportunity to get YRC stock options for an additional 20 percent of outstanding shares, bringing back bargaining-unit work that had been transferred to other countries, limiting the expansion of YRC Logistics and transferring its work back to the bargaining unit, restricting how the savings can be used, and requiring wages to revert to full rates should YRC file for bankruptcy or be sold. Job protections were added as well.

In addition, the document said, non-union workers at YRC will take equal pay cuts and, during the 18 months when YRC doesn’t participate in pension plans, won’t receive retirement benefits or 401(k) contributions.

YRC’s banks also agreed to “provide a fair share of the economic relief,” the document said, and YRC must provide the union with enough financial information that it can ensure the company’s compliance with plan provisions.

“Unfortunately, the freight recession has worsened for all trucking companies as 2009 has progressed, but it’s been more aggravated at (YRC) companies than any other trucking group operating in North America,” the Teamsters said in a document.

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.

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, YRCW CONTINUE EXCHANGING PROPOSALS

Less-than-truckload carrier YRC Worldwide Inc. and the Teamsters union have traded plans this week to help the company generate short-term cash, the Teamsters said.

A subcommittee of the Teamsters National Freight Industry Negotiating Committee and YRC Worldwide, Inc. continue to assess proposals. Discussions will continue through the week and face-to-face negotiations will resume next week.

Negotiations are being held at the Teamsters’ headquarters in Washington, D.C.

A 10% wage reduction agreed to earlier this year will continue throughout the life of the current National Master Freight Agreement was estimated to save at least $225 million a year. Pay and benefits of non-union workers also were cut.