YRC Worldwide Inc. announced Wednesday, Dec. 3, that its Yellow Transportation, Roadway, Holland and New Penn business units have asked their union employees represented by the International Brotherhood of Teamsters to modify the company’s current labor agreements.
“During this economic recession, we have already taken a number of steps to improve our financial and competitive position, as we continue aggressive short-term actions to meet the current environment as we plan for our long-term success,” says Bill Zollars, chairman, president and chief executive officer of Overland, Park, Kan.-based YRC Worldwide. “We are in the process of working with our union partners to modify the terms of our labor contract in a way that allows us to be more competitive with nonunion carriers in the short-term and, at the same time, protect and sustain the financial health of our dedicated employees and our company going forward.”
While working on a longer-term solution to this issue, YRC Worldwide says it is seeking immediate cost savings through proposed changes for the remainder of the contract, including a 10 percent reduction in all wages paid, inclusive of scheduled increases; and suspension of Cost of Living Adjustments (COLA). In exchange, Teamsters employees would receive a 15 percent ownership stake in YRC Worldwide, allowing them to share in future company performance through stock price appreciation. The details of this plan still are being finalized. Contributions to the health, welfare and pension plans would continue as negotiated previously.
“This modification would address our operating cost structure, which is higher than a number of companies in our industry, due primarily to pension plan funding obligations,” Zollars says. “Funding pensions for our own Teamsters employees is affordable. However, paying for all the retirees and former employees of failed companies as required under our current plans makes us less competitive.”
YRCW says the estimated cost savings from these modifications is about $220-$250 million annually. The company expects that a ratification vote on the proposed modification will occur prior to the end of the year with an expected effective date of Jan. 1. Nonunion employees of YRC Worldwide would receive the same or greater percent reduction in total compensation as their represented counterparts; this includes modifications made earlier this year to the nonunion pension, retirement and other benefit programs.
“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,” says 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.”
Ballots are scheduled to be mailed out to Teamsters members on or about Tuesday, Dec. 9, and ballots tentatively are scheduled to be counted on Dec. 30. About 40,000 Teamsters are employed actively at the affected YRCW companies.
“We are facing the worst economy in decades, so we need to act now to protect our members and their families,” says 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.”
YRCW says it took an important step earlier this year with the decision to integrate its Yellow Transportation and Roadway networks to improve performance. In addition, the company has moved to strengthen its financial position by commencing a tender offer to purchase outstanding notes, selling excess assets, entering into sale/leaseback transactions for core real estate, and executing various cost-reduction activities.
“Even as we take steps to improve our balance sheet, liquidity and net income, it is clear that we need to address our current cost structure to remain competitive in this environment,” says Mike Smid, president and CEO of YRC North American Transportation. “After outlining our position with the Teamsters leadership, they are strongly aware of the need to provide our company with economic relief to protect union jobs and retirement benefits. The Teamsters have been supportive in reaching a tentative agreement to modify the current contract, and we believe that the union leadership and our employees will agree with our analysis and vote for these necessary modifications to the current agreement.”
