YRC Teamsters Voting on Contract Extension as Carrier Faces $69 Million Debt Repayment
By Rip Watson, Senior Reporter
This story appears in the Jan. 27 print edition of Transport Topics.
UPDATE: Employees approved the contract extention Jan. 26.
Teamsters members at YRC Worldwide Inc. were voting late last week on a revised contract-extension proposal, which is on a fast track because the carrier’s first $69 million of debt repayment looms in less than three weeks.
The vote was announced Jan. 21, when local union leaders approved a plan that would extend the contract until March 2019 from the current March 2015 expiration. An earlier proposal was rejected by a 3-2 margin.
If approved, the contract extension would provide long-term certainty about union labor and benefit costs, which the company said is a requirement for lenders to refinance debt and lower interest costs. At 58%, wages and benefits represent the largest expense at YRC, where about 80% of employees are Teamsters. There is $327 million more debt coming due later this year and total debt of $1.36 billion.
“Our members made their voices heard about the company’s initial proposal, and we went back to the company and negotiated significant improvements,” Tyson Johnson, director of the union’s freight division, said last week.
The tentative agreement posted on the union website contains multiple changes, including 40-cent-an-hour wage increases for three years, starting in 2016. The raises are extended to dock, clerical and maintenance workers who previously weren’t included. There also is a $750 lump sum payment.
An earlier proposal to reduce vacation time was withdrawn. The top wage for clerical, dock and maintenance workers hired after the contract extension takes effect also is being raised.
The new proposal contained in a memorandum of understanding “is something our employees can have confidence is the best — and only remaining — path forward,” James Welch, CEO of YRC Worldwide, said in a Jan. 17 statement, when the parties’ agreement on a revised plan was announced. As the voting date approached, YRC had no further public comment.
From a financial standpoint, YRC is trying to lower interest costs that reached $124 million in the first three quarters of last year, while also shoring up a cash balance that dropped to $170.5 million over the same period. Interest costs at YRC have climbed at the same time that its profit before interest and taxes sagged in the third quarter. Profit after three quarters on that basis was $30 million.
The carrier recorded seven quarters of year-over-year operating performance improvements until it was tripped up in the third quarter by inflated operating costs. Much of those costs are tied to extra expense as the result of an operational change at YRC Freight.
That national freight unit consistently has trailed results at the regional carriers — New Penn, Holland and Reddaway. Through three quarters of 2013, the regional operations had $57 million in profit before interest and taxes, and YRC Freight stood at a $16 million loss.
Fourth-quarter results haven’t been announced.
YRC’s Jan. 17 statement said the new plan incorporates “a number of revisions to the company’s previous proposal which address concerns raised by the Teamsters leadership and its members.”
The proposal gives YRC added flexibility to close terminals and cut costs, particularly at YRC Freight, though it adds restrictions intended to save jobs where operations are profitable. In addition, the company would gain some options to move freight through purchased transportation instead of using union drivers, also with some flexibility.
In anticipation of an earlier approval of the union contract extension, YRC negotiated a plan to reduce its debt by $300 million, primarily through the issuance of new stock.
YRC Worldwide ranks No. 5 on the Transport Topics Top 100 list of U.S. and Canadian for-hire carriers.
