Allied Systems, Teamsters Union Clash Over Reversing 17.5% Wage Concession

This story appears in the June 14 print edition of Transport Topics.

Allied Systems Holdings and the Teamsters union are clashing over the possible reversal of a 17.5% pay cut the union agreed to three years ago when the car hauler emerged from bankruptcy.

Mark Gendregske, chief executive officer of Allied, Atlanta, said in a letter to union workers that the company couldn’t afford to restore the reduced wages because of the historic downturn in the auto industry.

“Given the massive challenges facing the industry and the fragile worldwide economy, the business simply cannot support a snap back without putting thousands of jobs at risk,” Gendregske wrote in his letter, noting a 46% reduction in nonunion jobs at the company.

At press time, U.S. Bankruptcy Court Judge C. Ray Mullings had not issued a ruling after a June 9 hearing on the issue in Atlanta.

Fred Zuckerman, who heads the union’s car-haul division, responded on June 2 with a letter insisting the cut wages be restored because the language in the 2007 agreement required a “snap back” to full wages on May 28, 2010. He asserted that the company was asking that the pay cut continue for another year.

“To be clear, the union expects your paychecks for work done on and after May 29, 2010, to reflect the full contractual wages earned, and we will take all necessary and appropriate actions to enforce the company’s obligations,” Zuckerman, co-chairman of the Teamsters National Automobile Transporters Industry Negotiating Committee, said in a message to members.

Average wages for car-haul workers are about $21 an hour.

According to Zuckerman’s message, the 2007 agreement said “the parties will meet to negotiate a transition to the full terms and conditions,” which the union interpreted as a requirement to restore full pay.

Allied, in its letter, asserted that the terms of the 2007 agreement required that a transitional agreement be negotiated instead of a pay restoration.

Neither the company nor the union responded to requests for additional comment on the proceedings. The union posted Gendregske’s and Zuckerman’s letters on its website.

“We still have a lot of unfinished business: We have to devote every dollar of cash flow (and then some) to buying the equipment necessary to meet our contractual commitments to our customers,” Gendregske asserted.

The parties did agree on the hard times that car haulers have faced since the Allied-Teamsters union agreement was signed.

In the interim, car and light truck sales fell to an annual rate below 10 million units, the lowest in three decades, before rebounding in recent months to an annual pace of about 13 million vehicles.

“Our business is less than half the size we projected when we emerged from bankruptcy in 2007. We never imagined the automotive industry would reach the lows witnessed over the past 18 months and that our ability to continue to operate would be threatened,” Gendregske said.

“In light of the unique financial difficulties facing the automotive industry, we offered to sit down immediately for early industry negotiations . . . but that anything other than immediate compliance would trigger a dispute over non-payment of contractual wages,” Zuckerman said.

The 2007 reduction agreement included a 15% pay cut and forgoing a 2.5% wage increase under the old contract that applied to Allied as well as other car-hauling companies, such as Cassens Transport Co., Jessup, Md..

Allied and other car haulers currently are parties to a three-year contract that expires on June 1, 2011.

The current national car-haul agreement includes a 2% wage increase that took effect for other signatories to the contract on June 1, but Allied drivers won’t receive the raise as long as the 2007 pay cut plan remains in force.

Union members at first rejected that industrywide contract when negotiators reached an agreement and subsequently ratified the pact in October 2008.

“Though we understand that business conditions may dictate that Allied cannot afford to ‘snap back’ to the full rates — Allied waited far too long to notify” the union, said Zuckerman.