YRC Wins Teamsters Approval on More Cuts

This story appears in the Aug. 17 print edition of Transport Topics.

YRC Worldwide said it took another step toward financial health by winning approval from most Teamsters to cut pay by another 5% and halt pension benefits for 18 months, steps that will save at least $45 million a month.

Union workers at the national less-than-truckload and the Holland regional LTL units approved the changes, the union and company announced on Aug. 7. In exchange, the union can own another 20% of YRC on top of the 15% granted when a previous pay cut of 10% took effect in January.

“With the support of our employee owners and other stakeholders, we continue making progress with our comprehensive recovery plan — realizing efficiencies from the YRC integration, restoring financial strength and positioning YRC Worldwide for future success,” CEO Bill Zollars said.

YRC’s latest cost-cutting steps follow moves to integrate its Yellow and Roadway national trucking services, trim its regional network, reduce pay and benefits for nonunion workers, sell excess facilities and raise cash from sale/leaseback arrangements. The added savings will reach $50 million a month next year, the company said.

“This development will buy the company some time to get its financial house in order, but it does not take the LTL provider completely out of the danger zone,” said Dahl-man Rose & Co. analyst Jason Seidl in an investor note that estimated YRC’s losses in the second quarter topped $50 million a month.

The company and the union said 90% of Teamsters covered by the National Master Freight Agreement are employed at YRC’s national unit and Holland.

The modifications to that agreement were rejected by workers at New Penn, a regional trucking operation included in the NMFA, and three Teamsters locals with similar contracts that together account for 10% of the company’s union work force.

YRC’s Aug. 10 regulatory filing said the company and union intend to “have these smaller bargaining units reconsider the modifications in the near future.”

“If these units do not approve the modification, they will continue under their current collective bargaining agreements without additional modification,” the filing stated. Changes to pension fund agreements also would be required, according to the filing.

The total vote on an agreement reached July 9 was supported by 58.5% of voting Teamsters, according to a union tally. That is less than the 77% that approved the first round of cuts in January.

YRC, whose cash balance has been cut nearly in half this year to $164.5 million at the end of the second quarter, is trying to rebound from a loss of $255 million from operations from April to June. YRC’s loss was almost double the cumulative quarterly profit of about $140 million reported by other publicly traded fleets in that period.

The second-quarter results were the fourth consecutive loss reported by the company that ranks No. 4 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers.

Including one-time charges, the loss topped $300 million as revenue dropped 45%.

“Even if the current financial challenges are overcome, the company will be faced with a variety of tough tasks including regaining market share, maintaining service in a changed network, reestablishing credibility and weathering a prolonged recession,” Seidl’s report said.

When second-quarter earnings were announced, the company said creditors had further eased earnings targets that were set earlier this year. Profitability requirements have been scaled back to $15 million by the end of the fourth quarter from an earlier $130 million by the end of the third quarter, using the standard of earnings before interest, taxes, depreciation and amortization.

Teamsters President James Hoffa pressed YRC’s lenders for additional concessions.

“Do the banks want the fate of 35,000 YRCW workers, hundreds of thousands of retirees and hundreds of thousands of other workers to be their responsibility if they do not significantly rework YRCW’s loan facilities?” Hoffa said in a statement.

YRC also said it has agreed on another $81.4 million in sale/leaseback transactions with North American Terminal Management Inc., a property investor. A total of $284.2 million in such transactions were completed in the first half of 2009.