YRC’s next challenge: pensions
ground breakers
The dust has settled from YRC Worldwide Inc.’s New Year’s Eve brush with
bankruptcy, and today the company is operating as a viable entity, albeit a
fragile one.
In the background, however, sits a potential 800-pound gorilla: YRC’s ability to meet pension obligations to its unionized employees come January.
As part of a series of mid-2009 concessions to help YRC conserve cash, its
35,000 employees who belong to the Teamsters union agreed to let the carrier suspend pension payments for 18 months. YRC is contractually obligated to resume contributions in January 2011. In 2011, it is expected to contribute slightly more than $300 per week—or about $15,000 a year—to the
pension of each Teamster employee.
For a company struggling with hundreds of millions in losses, soft less-
than-truckload (LTL) volumes, and a cut-throat pricing environment, coming
up with $500 million or so to meet its 2011 pension commitments seems a tall
order. YRC declined to comment other than issuing a statement through a
spokeswoman that it is “contractually obligated to make the payments.”
The Teamsters for a Democratic Union (TDU), a small but influential
Teamsters dissident group often at odds with the mainstream leadership,
doesn’t think YRC can make it work. “It’s a safe bet that come January, YRC
will be pleading poverty and asking for an extension of the pension contri-
bution freeze,” the group said in a late February posting on its Web site.
Ken Paff, TDU’s long-time president, was characteristically blunt-spoken
about YRC’s chances. “You want to bet the mortgage on that?” he asked in a
phone interview with DC VELOCITY. “Because I hate to see you become homeless.”
Others are equally skeptical. Calling it a “huge issue and potential problem,”
David G. Ross, analyst for Baltimore-based Stifel, Nicolaus & Co., said the Stifel
analysts “don’t see the company being able to make normal payments in 2011.”
Charles W. Clowdis Jr., an executive at the consultancy IHS Global Insight,
said he doesn’t know how YRC can generate the funds through its earnings
power, and that it may have to resort to borrowing.
; Retail chain Kohl’s is opening a
new distribution center near San
Bernardino, Calif. The new facility,
which will occupy almost 1 million
square feet of space, will expedite
picking, packing, and shipping to
online shoppers on the West Coast.
; Startup logistics firm s2f worldwide
has announced plans to establish its
headquarters and distribution center
in Plainfield, Ind. The $10.8 million
project will create 250 jobs by 2013.
; Canadian apparel importer Gildan
Activewear will open a new
850,000-square-foot distribution center in Charleston, S.C., this spring.
; Jake’s Finer Foods has opened a
new 180,000-square-foot refrigerated
distribution center and corporate headquarters in northwest Houston. The
center, which features slots for over
20,000 items and more than 4. 3 million cubic feet of storage space, is the
first phase of a project that will eventually include 360,000 square feet.
Pension overhaul sought
For his part, William D. Zollars, YRC’s chairman, president, and CEO, has
been actively pushing for an overhaul of the nation’s multi-employer pension
program, which is a pension arrangement between a trade union and a group
of at least two employers in a single industry. Originally established to allow
workers to change employers without losing their vesting privileges, the program requires trucking companies to fund the pensions of workers and
retirees from their companies and from competitors participating in the plan.
The scheme worked fine as long as there were numerous unionized trucking firms to spread the cost around. However, as company failures and consolidations over the past 30 years winnowed the ranks of unionized firms, the
burden fell on those that remained to pick up an even larger portion of total
retirement obligations, even for retirees who worked at now-defunct entities.
Today, YRC and rival ABF Freight System, which employ most of the
Teamster workers covered under the main freight agreement between the
union and trucking companies, are liable for the pension obligations of
retirees who were never employed at either YRC or ABF.
YRC and the Teamsters have thrown their support behind proposed legislation that would shift the pension liabilities of retirees from failed companies away from the Teamsters and to the Pension Benefit Guaranty Corp., a
federal corporation that protects more than 29,000 pension plans. ;
; Sketchers USA has entered into a
joint venture with HF Logistics I LLC
for the development of a 1.82 mil-lion-square-foot distribution facility in
San Moreno, Calif.
; Tire importer TBC Corp. plans to
open the first half of its new 1. 1 mil-lion-square-foot distribution center in
the Summerville, S.C., region later this
year.
; American Airlines Cargo Division
(AA Cargo) has opened its newly
relocated cargo terminal at Los
Angeles International Airport (LAX).
The facility offers streamlined handling capability, including a 3,000-
square-foot cooler for perishables,
expanded areas for courier cargo and
mail processing, and a designated
holding area for live animals.
