Hoffa Criticizes YRC Effort to Purchase Arkansas Best
This story appears in the May 20 print edition of Transport Topics.
Teamsters President James Hoffa has sharply criticized YRC Worldwide Inc.’s proposal to acquire Arkansas Best Corp. and its ABF Freight System less-than-truckload unit.
Calling YRC’s overture during ABF contract talks “unconscionable” and “an affront” to workers at both companies, Hoffa also said in a May 10 statement that he “will demand a full accounting of the calculations and decisions that went into their latest misstep.”
Despite ABF officials’ rejection and Hoffa’s criticism, YRC leadership said it still wanted to pursue a merger.
The statement by Hoffa, who had not responded to multiple requests for an interview by press time, cited “years of sacrifice” by Teamsters members at YRC, who took a 15% wage cut in 2009 in exchange for stock to help the company avert bankruptcy after several of its fleet acquisitions soured.
“We have seen this kind of arrogance from YRC before,” the union chief said. “We thought they had finally learned the lessons of past management catastrophes. Unfortunately it appears they have not.”
Hoffa made his comments a day after a May 9 regulatory filing by Arkansas Best disclosed and rebuffed YRC’s takeover proposal.
Meanwhile, YRC has said it still wants to pursue an acquisition. CEO James Welch said the company has made “tremendous progress” since he took over in 2011 and could make the deal work. It wasn’t clear at press time what the next move will be.
Teamsters spokesman Galen Munroe declined to make Hoffa or other union officials available for interviews last week. He also declined to elaborate on the Hoffa statement.
In that statement, Hoffa also called on YRC to restore full wages and pension benefits to union members.
Meanwhile, ABF’s Teamsters were awaiting details of the tentative contract agreement, announced on May 3, which analysts believe could lower wages as much as 6.5%. The union hasn’t yet scheduled a meeting to present the contract to local leadership.
Stock analysts and other union officials questioned the move by YRC.
BB&T Capital Markets analyst Thom Albrecht told Transport Topics on May 14 that “the possibility exists that this disclosure would put a little more pressure on the Teamsters’ members to make sure they give their utmost consideration to the contract.
“The most pressing issue now is how the rank and file receives the details of the contract and whether they ratify it,” Albrecht said.
“The time for an acquisition has already come and gone,” he added, because Arkansas Best’s stock price has risen 40% since the March 22 meeting. That makes an acquisition too expensive to YRC, given the condition of its balance sheet.
YRC has $1.3 billion in long-term debt, according to its first-quarter earnings report on May 3.
Ken Paff, an organizer for reform group Teamsters for a Democratic Union and a longtime Hoffa rival, told TT last week a combination of the two carriers was doomed because of past merger disasters at both YRC and ABF.
The most recent failure was in 2009, when YRC combined its national Yellow Transportation and Roadway Express networks, a move that triggered the loss of at least 45,000 union jobs, a 50% drop in revenue and losses topping $1 billion, according to company reports.
At least 70,000 Teamsters worked at those two carriers in 2009, compared with 25,000 today.
More than a decade ago, Arkansas Best acquired Carolina Freight Carriers, another LTL carrier, which helped lead the profitable buyer into a series of losses.
When asked for additional comment, YRC sent an e-mail to TT saying, “The proposal was fully vetted by YRCW management and its board, and it was their mutual conclusion that it was very much in the interest of all shareholders and stakeholders.”
Even before the 2009 problems, YRC had asset combination troubles. The company tried to blend regional LTL networks after its acquired USF Corp. in 2005, which helped started a round of net losses that continue today, despite a restoration of operating profits in recent quarters.
Paff, the Hoffa Teamsters rival, said there were a number of potential problems, including the unequal pay scales. YRC couldn’t afford to pay higher wages that ABF workers receive, Paff said, and lowering pay for ABF workers to YRC levels would cause turmoil.
YRC has angered the union’s leadership, he said.
“They’re all calling their locals and yelling about this. Welch should repudiate this offer and apologize,” Paff said.
Albrecht also raised a different timing issue.
“It was strange that an 8-K [regulatory] filing came out six weeks after a conversation,” he said. “Why wasn’t it done in a more timely manner?”
Arkansas Best spokeswoman Kathy Fieweger told TT last week a disclosure wasn’t required. She said it was made to ensure the dissemination of accurate information after the company was advised by a reporter that an article would be published.
