YRC, Teamsters Discuss Cost Reduction Plan
This story appears in the July 6 print edition of Transport Topics.
YRC Worldwide and Teamsters union met last week to talk about cost reductions intended to help the largest less-than-truckload carrier lower its expenses and return to profitability.
Negotiations between the union that represents 45,000 YRC workers and the company that lost $257.4 million in the first quarter began on June 29 at the Teamsters’ headquarters in Washington and were continuing at press time.
The company and union are attempting “to negotiate a plan aimed at addressing the company’s short-term operating cash needs,” according to a union statement. Neither the company nor the union commented further on the talks.
YRC is “doing everything it can to try and stay afloat,” Stifel Nicolaus analyst John Larkin wrote in a June 30 report. “Without further concessions, the company will likely run out of cash this fall as operating losses and interest payments chew up remaining cash availability.”
During the first quarter, YRC consumed $76 million, or $25.3 million a month, of the $325 million in unrestricted cash available when the period began. Its cash position has stabilized in the second quarter, YRC has said in investor reports.
YRC entered the second quarter with $249 million in cash that wasn’t restricted by credit agreements. Its credit agreement requires it keep at least $100 million in cash on hand.
Teamsters for a Democratic Union, a splinter group, said on its Web site that YRC was seeking 14 months of pension payment deferrals that could save about $500 million, or $35.7 million a month.
A 10% wage cut the union agreed to in January, in exchange for a 15% stake in the company, was projected to produce at least $225 million in savings annually. Members approved that wage cut by a 3-1 margin; additional concessions also would require rank-and-file approval.
Coupled with other savings from nonunion pay cuts, asset sales and operational integration, YRC has said its annual costs already have been cut $665 million, or $55.4 million a month.
That total could climb above $90 million monthly if the reported pension savings could be realized.
That rate of savings would exceed the revenue loss that reached $230 million, or $76.7 million a month, during the first quarter.
YRC also has gained some relief on the cash front by winning agreement from the Central States Fund to defer $83 million
in second-quarter pension contributions, providing real estate as collateral. Potential cuts of $50 million more in that quarter are still being reviewed by other pension funds.
In statements before the current talks, union leaders said they expected lenders also would agree to further cost-saving measures. YRC did not comment on the union’s expectations.
Lenders already have modified the company’s credit agreement twice this year, most recently to remove a second-quarter earnings target.
Analysts surveyed by Bloomberg News project a loss of $1.72 a share, or more than $110 million, when YRC posts its second quarter financial results July 23.
That would be an improvement from YRC’s first quarter loss, excluding charges, of $2.63 a share, using the company’s calculation. Including costs such as combining the national LTL networks, the loss was $4.14 a share.
