Teamsters Break From AFL/CIO; Vow (again) to Organize Overnite

Memories are long in union circles, and the crushing defeat the International Brotherhood of Teamsters (IBT) suffered after a bitter, three-year battle to unionize less-than-truckload (LTL) carrier Overnite Transportation has not been forgotten. The Union hopes to reverse that defeat now that UPS, whose workforce is represented by the Teamsters’ Union, will acquire Overnite.

On the same day it announced it would split from the AFL/CIO group of labor unions, the IBT said it would begin efforts to organize Overnite. The dotted-line relationship between the two announcements is a shift in focus from politics to the body politic. The IBT and other breakaway unions split with the AFL/CIO, which the Unions’ leadership viewed as concentrating on political lobbying. Almost as a reinforcement of its message that it would focus on member needs, the IBT vowed to organize Overnite Transportation.

From 1999 to 2002, the IBT and Overnite were in and out of court on a city-by-city battle for supremacy at Overnite terminals. At that time, Overnite was owned by the holding company for the Union Pacific Railroad. Shortly after winning its fight to remain union free, Overnite was spun off as a publicly traded company. In its short public run, Overnite has turned in a strong performance, reporting an increase in operating revenues of 12.4% in its sixth full quarter on the NASDAQ and a 37.4% increase in net income. Those second quarter 2005 revenues of $470.6 million reflect a 5.4% increase in tons per day coupled with a 3.9% increase in revenue per shipment (excluding fuel surcharges).

Overnite is encouraging shareholders to accept the UPS offer of roughly $1.25 billion at its annual shareholder meeting in August. In addition to moving UPS into the less-than-truckload market, Overnite, with its 91.7 operating ratio, offers the parcel carrier a lucrative subsidiary.

The UPS acquisition of Overnite can’t be decoupled from Yellow Roadway Corp.’s recent announcement it would acquire largely non-union regional LTL carrier USF. The two acquisitions run counter to a trend in the late 1990s for transportation companies to separate union operations from non-union through divestiture. National LTL carrier Roadway Express was the first to make a move when it was launched out of Roadway Services as a stand-alone company and non-union regional LTL operations, its parcel service – RPS -- and its third-party logistics company formed Caliber. FedEx later acquired Caliber and the regional LTL operations were expanded in 2001 through acquisition of non-union LTL carrier American Freightways. CNF Inc. followed suit and spun off Consolidated Freightways; Yellow Inc. divested of its non-union regional carriers Preston Trucking and Saia.

Success organizing Overnite will doubtless lead the Teamsters to approach USF workers as well.

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