LTLs Ward, Saia Reduce Pay as Freight Volumes Decline

This story appears in the April 6 print edition of Transport Topics.

Two regional less-than-truckload carriers announced across-the-board pay cuts because of deteriorating freight volumes and prices, Saia Inc. by 5% for salaried employees and drivers, and Ward Trucking Corp. by 8.9%. Both companies said executives’ pay was cut even more.

“The purpose of the way we’re handling this is for preservation of jobs,” G. William Ward, chairman of Ward Trucking, told Transport Topics April 2. “We’re a family-run company in business for 78 years, and we do business the way a family would, to keep as many employed as we can and, importantly, with fringe benefits.”

Ward said the company was financially sound.

“We’ll weather this,” Ward said. “I’ve been with the company 60 years, and this is the fourth downturn I’ve been through.”

“This move is not a reflection of any inherent weakness in the company,” said Bill T. Ward, the company’s chief executive officer and son of the chairman. “To the contrary, our financial foundation remains strong.”

Saia, Duluth, Ga., ranks No. 25 on the Transport Topics 100 listof the largest for-hire carriers in the United States and Canada and No. 8 on the Transport Topics list of the top LTL carriers by revenue, while Ward Trucking, Altoona, Pa., is No. 24 on the LTL list.

Bill T. Ward said in a March 30 statement that the company’s “average price for moving a shipment is now 5% below the average price we were charging in 2004.”

“At the same time that prices have gone down, our costs have gone up,” CEO Ward said. “Wage rates have gone up more than 12% since 2004 . . . [and] the cost of purchased goods and services has risen 14% over the same period.”

He said the pay cuts would affect about 1,200 employees.

Chairman Ward said the company has about 500 tractors and 1,250 trailers and employs only company drivers. He said those that driving LTL routes receive hourly wages while truckload drivers are paid by the mile.

Ward the son said pay cuts would affect Ward Logistics but by a smaller percentage, which he did not disclose. “They have not experienced the same deterioration in pricing as the other two subsidiaries and have been able to maintain and improve profitability,” he said.

Chairman Ward said that the company’s logistics arm was much smaller than its LTL and truckload operations, including mainly warehousing and dedicated contracts.

The senior Ward said his son and two vice presidents were visiting all 22 of Ward’s service locations to discuss the cutbacks.

“No one’s jumping with joy, but so far, the meetings are good,” he said. “The people understand it and appreciate what we’re doing to keep as many people as possible employed.”

Saia, in an April 2 statement to the Securities and Exchange Commission, said that deteriorating freight volumes and revenues were the reasons for its decision to slice pay.

“In the first quarter of 2009, the company’s LTL tonnage per day is down more than 7% from the prior-year quarter,” Saia said in its statement. “The company’s total tonnage per day in the first quarter of 2009 was down more than 9%, and total revenue per day is down approximately 16% compared to the prior-year quarter.”

Saia, said it would reduce “compensation equal to 10% of salary for the company’s leadership team and a 5% wage reduction for hourly, linehaul and salaried employees in operations, maintenance and administration.”

Saia said the pay cuts, which also include a 10% reduction in compensation to the company’s nonemployee directors, “were taken in an effort to save approximately $18 million annually.”

Saia has 8,400 employees, 3,400 tractors and 11,340 trailers.

Both companies said they planned to restore wages to their pre-cut level after the economy rebounds.

G. William Ward declined to specify the pay cuts for 25 Ward executives, including its owners, except to say they would be larger than for salaried workers.

He added that the company has made no significant layoffs this year, though it did cut back slightly in its truckload division last year.

Saia executives did not respond to requests for more details.

“From my conversations with trucking companies, other firms are doing the same thing of cutting pay,” said Chris Brady, president of the truck consulting firm Commercial Motor Vehicle Consulting, Manhasset, N.Y.

“Trucking companies are going to have a hard time strengthening their finances through credit, because banks are not lending, so they’re looking to shore up their balance sheets through internal cuts,” Brady told TT.

Independent freight analyst Edward Wolfe said in his April 2 newsletter that the Saia news did not lead him to change his forecast of 7 cents per share for the company’s first-quarter profit, but “we continue to see great near-term risk to the LTL stocks, which will likely report extremely weak earnings or losses in [the first quarter] and throughout 2009.”