YRC, Teamsters Set Talks on Cost-Cutting
This story appears in the June 29 print edition of Transport Topics.
YRC Worldwide Inc. and the Teamsters union planned to return to the bargaining table June 29 to pursue additional cost-cutting steps that would help the less-than-truckload carrier cope with current financial difficulties.
The meeting at union headquarters in Washington follows the June 18 announcement that YRC received approval from its largest union pension fund to defer $83 million in second-quarter cash contributions. Union members voted by a 3-1 margin earlier this year to accept a 10% pay cut.
“These discussions will address alternatives to help to reduce the company’s cost structure and preserve operating capital going forward,” YRC said in a statement issued on June 24.
CEO William Zollars said, “We are grateful to the Teamsters for their willingness to consider further adjustments to our contracts to help reduce our cost structure.”
YRC did not say whether it would have additional talks with lenders, but the Teamsters statement said, “We are entering these negotiations with the expectation that YRCW’s banks and other stakeholders will also cooperate in helping solve the company’s immediate cash need.”
YRC’s cash balance without restrictions dwindled by $76 million during the first quarter, bringing that balance to $249 million. The company stated June 18 that its cash situation has stabilized following a loss of $257.4 million in the first quarter that included one-time charges.
During that quarter, freight volume slid 30%, and revenue declined more than 20%. A portion of the declines was attributed to the recession and the rest to customers who switched carriers.
The 10% wage reduction that will continue throughout the life of the current National Master Freight Agreement was estimated to save at least $225 million a year. Pay and benefits of non-union workers also were cut.
Under the terms of the contract, any further revisions also would have to be voted on by the rank and file.
YRC faces the prospect of increasing contributions to health and welfare funds by $1 an hour in August this year as well as in that month of 2010, 2011 and 2012 before the contract expires in March 2013.
Talks with pension funds other than the Central States Funds continue about deferral of $50 million in cash contributions that would be replaced by real estate collateral. The Central States Funds agreed to defer $83 million in cash contributions for the second quarter and accept real estate collateral instead. Cash payments to the fund would have to start in January 2010 (click here for previous story).
Before the agreement was reached with the pension funds, YRC obtained the needed consent of lenders that already have liens on the properties.
Lenders and YRC already have agreed twice this year to modify credit agreements to give the company more financial flexibility. The second amendment removed an earnings target for the second quarter that had been set in February. Wage reduction talks began in the fall as the recession deepened and YRC’s losses mounted to $244.4 million in the fourth quarter, including impairment charges.
YRC also moved up the integration of its Yellow Transportation and Roadway LTL units, first an-nounced in September, to March 1 from an original target of year-end. A plan to reduce terminals to 400 by year end from the current 430 also was accelerated, with intended completion by June 30.
As part of the cost-cutting effort, YRC has sold and leased back terminals to investor groups, rival LTL carrier Estes Express and a real estate holdings firm called North American Terminal Management.
Surplus real estate that isn’t needed in the reduced terminal network has been sold or is for sale, according to company statements.
A total of about 45,000 Teamsters were working at the company’s units before the downturn that has reduced that number to approximately 35,000, according to company statements last month.
