newswor thy
will Teamster givebacks
be enough to save YRC?
AS OF THIS MID-DECEMBER
writing, 40,000 Teamsters working at YRC Worldwide’s four
trucking units were voting on
wage concessions their leaders
had negotiated with YRC management—an agreement that
called for a one-time 10-percent
wage cut and elimination of
cost-of-living increases over the next four years in return for 15 percent
ownership in the troubled trucker. If the rank and file blesses the deal, it
would save YRC well over $200 million annually. Yet some say the concessions will do little more than give the country’s largest less-than-truckload
carrier a reprieve from its date with destiny.
The contract modification, attempted only a handful of times in the
annals of American trucking, is designed to preserve union jobs, pensions,
and health benefits while reducing YRC’s annual costs by $220 million to
$250 million. YRC says the changes are needed to manage through the
triple whammy of a deepening recession, weakening freight demand, and a
brutal pricing environment.
In a statement, YRC said the agreement allows it to “preserve market
share and compete in the predatory pricing environment, while continuing
to support our workers’ pension recipients.” Employee health, welfare, and
pension benefits will remain unchanged, as will current work rules. In addition, union members will still receive scheduled annual wage increases over
the next four years. Those increases, negotiated earlier under the National
Master Freight Agreement, will boost pay by $1.70 an hour by the time the
agreement expires in 2013.
Teamsters officials hailed the agreement as the most far-reaching they’ve
negotiated with an employer in such difficulty. At the same time, the union
was blunt in its assessment of YRC’s prospects. “Even under the best scenarios, YRC will be stretched to its limits over the next two years, and managing liquidity will be the primary business task over that time,” the union
said in a statement.
Storm clouds gather
YRC’s financial condition darkened in mid-November when Standard &
Poor’s downgraded its debt rating three notches and raised doubts about the
company’s ability to meet its obligations in the wake of falling profits. The
S&P action required the company to pledge about $1.5 billion of its remaining unencumbered assets as collateral. Because YRC no longer has any free
assets to leverage, its borrowing window has been all but shut, and the company “could face the ultimate liquidity crisis” in 2009, the Teamsters said.
In an effort to lighten its debt load and avoid being in violation of its loan
covenants, YRC has offered to buy back $260 million of its debt for p. 12
help for the heartland
The state of Ohio is apparently looking to
the logistics industry to help jump-start a
job-creation program. On Nov. 21, Ohio
launched a $100 million initiative to bring
infrastructure investment—and thousands
of jobs—to the economically battered
state. The state plans to allocate funds
from its new Logistics and Distribution
Stimulus Program in the form of loans for
eligible transportation, logistics, and
infrastructure projects within its borders.
The initiative is part of a $1.57 billion
package the state says will create as
many as 57,000 jobs over the next two to
five years. The state estimates the logistics industry could generate up to 4,200
of those new jobs, according to Robert
Grevey, a spokesman for Ohio’s
Department of Development.
In a statement, Ohio officials said the
logistics and distribution program will
“help create a seamless multimodal
transportation infrastructure across the
state, linking rails, roads, waterways, and
airports.” But they’ve made it clear that
job creation is the program’s top priority.
Accordingly, bidders must disclose the
number of jobs their projects will create.
The state will fund 75 percent of each
awarded project, with the bidder financing the rest. Should the bidder meet specific performance criteria, the state’s loan
will be forgiven. There is a $10 million
ceiling on all infrastructure loans.
The announcement comes as Ohio
faces the loss of 7,000 to 8,000 more
jobs once express delivery company DHL
ends operations in the domestic U.S.
market and shutters its air hub in
Wilmington, Ohio. Most of the job losses
will come from ABX Air Inc., which had
operated aircraft for DHL but will no
longer do so if DHL begins contracting
out flying operations to rival UPS, whose
main hub operations are in Louisville, Ky.
Negotiations between the two companies were ongoing at press time.
—M.S.
