ABF, Union Expected to Talk; LTL May Receive Concessions

This story appears in the March 22 print edition of Transport Topics.

ABF Freight System and the Teamsters union appear to be heading toward talks that could result in wage, health or pension concessions for the nation’s fifth-largest less-than-truckload carrier, officials from both sides have said.

ABF and its parent company, Arkansas Best Corp., have been asking for concessions to the 2008 National Master Freight Agreement since the Teamsters union granted some concessions to YRC to help the nation’s largest LTL stay afloat.

The Teamsters union had rebuffed ABF’s requests until March 12, when a union letter to members posted on the Internet suggested that the time had come to begin negotiations.

“Based on our current understanding of the industry, the company’s financial position and from concerns raised by many of you, we now believe it is in our best long-term interest to fully engage ABF through formal discussions to determine if, and what type of, contractual relief may be necessary,” the union said in the letter.

“ABF is pleased the Teamsters have acknowledged the need for potential discussions,” company spokesman Danny Loe told Transport Topics. He declined to discuss the topic beyond that.

Arkansas Best told the Securities and Exchange Commission that it employed 10,347 people as of the end of last year and about 72% of them — about 7,450 — were Teamsters union members.

Last year, Arkansas Best lost $127.5 million on revenue of $1.47 billion, with about half of the loss coming from a one-time, noncash impairment charge of $64 million. The results represented a significant decline from 2008, which was generally not a good year for trucking, although the corporation still had net income of $29.2 million on revenue of $1.83 billion.

The company’s best recent year was 2006, when it earned $84.1 million on revenue of $1.86 billion.

ABF and the YRC operating companies are similar in that they both became well known for doing longhaul, nationwide LTL work with union labor forces, although in recent years they have taken on regional transportation as well. Both are part of the five-year National Master Freight Agreement with the Teamsters that was signed in 2008.

YRC has negotiated at least two significant modifications to that labor pact as part of its restructuring efforts. In January 2009, the sides agreed to a 10% wage cut worth $220 million a year, with the company giving the union a 15% ownership stake in return (click here for previous story).

During the summer, the Teamsters then granted the company an additional pay cut in exchange for more stock (click here for previous story).

ABF management has said repeatedly in response that it cannot afford to be the single-highest payer of wage rates in the LTL industry.

The Teamsters union said in its statement that its national leadership spoke with officials of locals on March 15, and there would be a conference call with ABF Teamsters on March 18.

“After gathering input from local union leaders and members, we will determine the next steps,” the union said in the statement.

Teamsters press secretary Galen Munroe said if there is a modification of the NMFA pertaining to ABF, it would not necessarily be identical to what was granted to YRC.

“We are seeking input from members on whether to have discussions with the company,” Munroe said. “If talks proceed, we will look at ABF’s specific needs and tailor a response that’s mutually beneficial to the company and to our members.”

The union also said in its statement that, if there were a modification, it would be written around goals of equality of sacrifice, access to information and a return to the terms of the NMFA when the economy and the company’s finances improve.

YRC, Overland Park, Kan., and Arkansas Best, Fort Smith, Ark., rank Nos. 4 and 18, respectively, on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers.

Investment research firm Wolfe, Trahan & Co., New York, told its clients on March 16 that a modification to the labor contract would be “a clear step in the right direction for Arkansas Best, after months of the Teamsters’ denying they were even considering a wage reduction.”

The Wolfe, Trahan note said a deal could produce a “big potential boost to earnings per share,” but it said that probably will not happen immediately as details of the agreement remain to be worked out and that, while the economy and the outlook for trucking are improving, they are doing so slowly.