DC Velocity - October 2010

newsworthy

YRC Teamsters offer concessions in return for CEO’s ouster

PHOTO COUR TES Y OF FEDEX CORP.

THE TEAMSTERS UNION WILL ALLOW TROUBLED trucker YRC Worldwide Inc. to forgo annual pension contributions for the next five years in return for the ouster of YRC Chairman and CEO William D. Zollars and a pledge from YRC’s lenders to negotiate more equity-for-debt swaps, according to a communiqué posted Sept. 9 on the website of a Teamsters dissident group.

The proposal, which appeared on the website of Teamsters for a Democratic Union (TDU), called for Teamster leadership to ask YRC’s unionized rank and file to agree to the five-year pension contribution waiver, which would save the company an estimated $350 million a year. Currently, YRC is scheduled to resume pension contributions on Jan. 1, 2011, after already obtaining an 18-month waiver on payments from its union workers.

In return, union leaders want YRC to terminate the contract of Zollars, who has been at the company’s helm since 1999. In addition, the union will ask YRC and its lenders to work out more equity-for-debt swaps so banks would own more stock and reduce YRC’s debt load, according to the communiqué. Through a spokeswoman, YRC declined comment.

At the end of 2009, YRC’s lenders agreed to swap $530 million in debt for about 1 million shares of newly issued equity. The move was pivotal in helping YRC avoid a bankruptcy filing and possible dissolution.

The latest proposal would mark the third time in 18 months the company’s 23,000 unionized workers have been asked to make concessions to keep YRC viable. Last year, workers agreed to two separate wage cuts totaling 15 percent, as well as to the pension waiver. The wage reductions are scheduled to run until March 2013, when the current National Master Freight Agreement governing employees in the less-than-truckload (LTL) industry expires.

At press time, YRC said it had reached a tentative agreement with the Teamsters to “address the company’s competitiveness.” However, YRC made no mention of Zollars’ status in its statement announcing the deal. ;

—Mark Solomon

FedEx to combine its LTL
freight units

FedEx Corp. said in mid-September that it will combine its two less-than-truckload (LTL) operations into a single unit effective early next year, the company’s most ambitious effort yet to turn around its struggling LTL business amid a difficult operating environment.

The move, which will combine the FedEx Freight regional LTL business with the FedEx National LTL longhaul unit, will result in the closing of 100 freight terminals, or about 20 percent of the facilities in its 470-terminal network, and the elimination of 1,700 jobs. The company’s freight division employs about 34,000. Affected employees will be allowed to apply for other positions at the division and across the company, said Jennifer Caccavo, a FedEx spokeswoman.

Most of the reductions are expected to come from the longhaul unit, which had been re-brand-ed FedEx National LTL following FedEx’s 2006 acquisition of Watkins Truck Lines. The longhaul operation has struggled with the subpar volumes and cut-throat pricing that have dragged down performance across the entire LTL sector. Regional LTL carriers like FedEx Freight have fared better on a relative basis as their segment is seeing stronger volumes and better overall pricing than its longhaul counterpart.

The integrated division, which will be operational Jan. 30, will have a single point of contact for FedEx heavyweight shippers, and will segment its offerings into priority and economy services, depending on customer need, FedEx said. Caccavo noted that as far as the customer is concerned, “there will be one pickup, one delivery, and one truck” regardless of the service chosen.