Teamsters Leaders Due to Review YRC Bid to Extend Contract to Assist Refinancing
By Rip Watson, Senior Reporter
This story appears in the Dec. 2 print edition of Transport Topics.
The Teamsters union’s local leadership is scheduled to meet this week to review YRC Worldwide’s proposal for a contract extension the company needs in order to secure long-term refinancing of $1.4 billion in debt, the company said last week.
“This is really positive news,” CEO James Welch told Transport Topics on Nov. 26 after the announcement of the Dec. 6 meeting of local leaders. “We had some good discussions with the union and certainly appreciate the partnership and cooperation.”
In advance of the meeting, YRC is conducting a multimedia campaign aimed at convincing the union to extend a contract that expires in March 2015.
If a tentative agreement is reached, 26,000 YRC Teamsters must decide whether to approve it. Welch expressed confidence that the proposals would be approved by local leaders and ratified by the membership.
Without disclosing details, Welch said, “We believe the proposal will move forward. We are continuing to go down a path we have been working on for some time.”
“Interest payments have been strangling our cash flow,” Welch said in a Web video, alluding to $150 million in annual costs to service debt. More than 70% of that debt comes due in less than 16 months, according to a regulatory filing, creating the need for a longer contract.
“We simply don’t have $1 billion to pay off those debts,” Welch said in the video. “Our lenders have made it clear we have to demonstrate increased consistency and stability before they will agree to refinance the debt.”
The company’s website, created last month, also includes information on YRC’s debt relative to other publicly held carriers, which owe a combined total of $1.5 billion. There also is a question-and-answer blog.
“Any updates on YRC will be published online on our website,” union spokesman Galen Munroe told TT on Nov. 25. “We will not be commenting beyond those updates at this time.”
YRC’s third-quarter earnings report released on Nov. 12 underscored its situation. The company’s results were worse on a year-over-year basis for the first time in eight quarters.
Profit before interest and taxes totaled $5.8 million, down from $27.3 million in last year’s third quarter. Over three quarters, results on that basis showed a profit of $30 million, and interest costs totaled $124.2 million.
Jason Seidl, an analyst for Cowen and Co., told TT on Nov. 26 that he believes YRC will join the other two major unionized LTL carriers — ABF Freight and UPS Freight — in achieving labor peace.
“What are the options for YRC?” Seidl asked. “The banks have been very lenient up to now. If you want to keep the carrier viable, you have to work with them.”
The Teamsters for a Democratic Union activist group said on its website that the company offered several proposals during Nov. 20 and 21 talks, without identifying a source.
TDU said the proposals included: resuming wage increases next year, changing the overtime pay structure to begin after 40 hours of work in a week rather than eight hours in a day under the current agreement, outsourcing of some maintenance costs and making more revisions to health and welfare benefits.
Welch declined to comment or respond to TDU’s statements, labeling them “rumors.”
YRC’s Teamsters previously approved two contract revisions, trading a 15% cut in pay and reduced pension benefits for a 20% stake in the company.
