YRC Worldwide announced Thursday, Jan. 8, that its union employees represented by the International Brotherhood of Teamsters have voted overwhelmingly to modify the current labor agreements for the company’s Yellow Transportation, Roadway, Holland and New Penn business units.
The modified contract includes a 10 percent reduction in all wages paid, inclusive of scheduled increases, and the suspension of cost-of-living adjustments (COLA) for the remaining life of the contract. In exchange, Teamsters employees will receive a 15 percent ownership stake in YRC Worldwide, allowing them to share in future company performance. Contributions to the health, welfare and pension plans will continue as previously negotiated.
Nonunion employees will experience the same or greater percent reduction in total compensation as their union counterparts, including modifications made last year to the nonunion pension, retirement and other benefit programs. Nonunion employees also have received options to purchase up to a seven percent ownership stake in the company. Senior executives will reduce total compensation, but will not be eligible to participate in the stock option program.
“During a time of economic hardship, we are proud of the understanding and support of our employees,” says Bill Zollars, chairman, president and chief executive officer of Overland Park, Kan.-based YRC Worldwide. “The amended contract will provide our company with significant annual cost reductions that will also have long-term benefits as the economy recovers.”
The company expects to achieve $220 to $250 million in annual savings from its labor contract modification during the remaining term of the contract in addition to the $75 to $85 million in savings in 2009 from the nonunion compensation reductions that were effective Jan. 1. The company also expects to improve 2009 operating income by a run rate of $200 million from the integration of the Yellow Transportation and Roadway networks that is expected to be complete in early spring 2009.
“This agreement is another critical step in our wide-ranging plan to strengthen our balance sheet, while enhancing service for our customers through our national integration of Yellow and Roadway,” Zollars says. “With this wage reduction and our other planned cost savings, we are confident that we can sustain our liquidity position and meet our debt obligations, despite the economic downturn, upon completion of negotiations on an amendment to our credit facilities.”
The modifications were ratified by a 77 percent to 23 percent margin, with more than 75 percent of members casting ballots. “While we never want to see wage reductions, this vote shows that our members understand that we are facing the worst economy since the 1930s and that the company needs some help to get through this difficult period,” says Tyson Johnson, director of the Teamsters National Freight Division. “We are hopeful that this agreement will protect the livelihoods of our members and their families by protecting the jobs and health, welfare and pension benefits of our freight members.”
The plan has a provision that will allow Teamster members to recover lost wages if YRCW’s stock price goes up in the future. This would be done through warrants, which are similar to stock options. In addition, union members have protections, including language on monitoring and enforcement rights.
“We are facing the worst economy in our lifetime, so we needed 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, requires equal sacrifice among all YRCW employees, gave us the ability to obtain stock in the company, and placed restrictions on where the savings can be used, among other protections for our members.”