The relief plan proposed by the motor carrier includes a 10% reduction in gross wage and mileage rates to extend through the term of the current National Master Freight Agreement (March 13, 2013). The cost of living adjustment will also be suspended for the period.
There are no changes to any health, welfare and pension contributions, said the IBT.
Union leaders in freight locals across the US endorsed the plan, said the IBT. “Today's overwhelming support clearly shows that local union leaders from every area of this country know how bad this recession is, and they are confident that this agreement will protect the livelihoods of our members and their families,” said Tyson Johnson, director of the Teamsters National Freight Division. “No one wants to see wages get cut, but this agreement will help get the company through this deepening recession while protecting the jobs, health, welfare and pension benefits of our members.”
Meanwhile, YRC Worldwide was actively taking steps to address its financial future. It terminated a tender offer for some of its debt, noted analysts at Stifel Nicolaus. This in order to focus on reworking its credit agreement and asset-backed securitization agreement with its bank group, said David Ross of Stifel Nicolaus.
The company's take on freight volumes echoed reports of other less-than-truckload (LTL) carriers ABF Freight System, Con-way Freight, FedEx Freight, and Old Dominion Freight Line, all of whom have made public comments about the rapidly deteriorating LTL freight market.
YRC was reporting that, through November 30, 2008, National LTL tonnage per day fell by 11.8% year-on-year. For the same period, YRC Regional LTL tonnage per day was down 20.9%.
The company has entered into a sale-leaseback transaction with NATMI Truck Terminals, LLC which is expected to close no later than mid-February 2009. The aggregate price for the facilities is $150.4 million, says Ross, and annual lease payments for those properties are expected to be $21.1 million, subject to annual CPI-related increases.
Rating firm Moody's had also downgraded the YRC's corporate credit rating to Caa3 (nearing default status) following the withdrawal of the company's tender offer, Ross continued.
Stifel Nicolaus expects the Teamsters will approve the wage concessions and it will also take a significant amount of capacity out of its network while reworking its bank agreement. Ross added, “We are watching very closely what the company reports and how the integration [of Yellow Transportation and Roadway] progresses, as its financial health is very fragile.”
“We are facing the worst economy in decades, so we need to act now to protect our members and their families,” said Jim Hoffa, Teamsters General President. “We worked hard to draft a plan that holds the company accountable. The plan requires equal sacrifice among all YRCW employees, and we have the ability to obtain stock in the company, and to place restrictions on where the savings can be used, among other protections for our members. I am confident that when our members read the plan details, they will agree that this is a necessary step during these very, very difficult times.”
Ballots were mailed in early December 2008 and were originally scheduled to be returned by the end of the month, but the high volume of requests and concerns over receiving the ballots in a timely manner led the IBT to extend its deadline for voting. About 40,000 Teamsters are actively employed at the affected YRC companies—Yellow Transportation, Roadway, USF Holland and New Penn.
The IBT noted this relief plan comes at a time when all carriers are being affected by lower volumes and weaker markets, but “Operating results at YRCW were trending negative long before the mortgage banking and financial markets collapsed in 2008. As the largest trucking company in the country, YRCW has felt the general freight industry’s downturn most acutely, but lower volumes have been reported at virtually all national carriers for some time,” said the IBT. “Continued setbacks in the housing and automotive-related sectors coupled with collapsing consumer demand suggest it will be late 2009 if not 2010 before positive tonnage numbers return, said the Teamsters.
“Because of a series of tightening loan requirements over the next several months and the potential for further erosion in this soft economy, the union’s independent experts have determined it is questionable if YRCW can generate enough cash to survive a prolonged downturn. Even under the best scenarios, YRCW will be stretched to its limits over the next two years and managing liquidity will be the primary business task over that time period,” the Teamster statement continued.
“The Union believes it has only one opportunity in 2008 to help this company recover its financial footing and position in the trucking industry. It is not only current Teamsters that could be impacted by a failure of one or more of YRCW’s trucking subsidiaries. Tens of thousands of retirees, both Medicare and non-Medicare eligible, could either lose their medical coverage if the union were to delay action at this critical juncture. The implications for current and future pensioners would be just as dire, as the number of retired participants would swell enormously and shift untold burdens on other employers who can ill afford additional financial pressure in this economy,” the IBT continued.
“The team of professionals the union has assembled to verify the company’s prospects under various scenarios has concluded that any further financial distress on YRCW during the remaining years of the 2008-13 NMFA would threaten the ultimate economic security of hundreds of thousands of Teamster members and retirees.”