Summary
YRC Worldwide's 50,000 Teamsters employees are being asked to approve an additional 5 percent wage cut as well as an 18-month freeze in the company's pension contributions. This comes on top of a 10 percent wage cut already approved by the YRC workers. Combined, these two givebacks are estimated to save YRCW approximately $900 million annually as the debt-laden company fights for survival.
Analysis
Another quarter, another round of wage and benefit cuts being proposed to rank-and-file Teamster members at troubled YRC Worldwide, the nation's largest trucking company by revenue.
YRC is asking its 35,000 active workers (plus an additional 15,000 or so laid-off or furloughed workers) to approve a 5 percent wage giveback (on top of an early 10 percent wage cut) that would last through the end of their current contract in 2013.
In addition, YRC wants to stop making payments to Teamsters pension plans for 18 months. That would save the company approximately $45 million a month, rising to $50 million a month in 2010.
Together, the two givebacks are estimated to save YRC Worldwide as much as $900 million a year.
You can pretty much bank on this latest giveback to be approved by Teamsters at YRC companies. Why? They don't have many options.
Given that the average age of a Teamster in the LTL sector is about 60, there are not a lot of career options for many of these ladies and gentlemen.
Furthermore, the freight recession has worsened to the point where most of these Teamsters realize this is probably the last contract they will need before retirement.
Currently, Teamsters employees make about $20 an hour, plus additional generous fringe benefits. The wage cut is worth about $1.16 an hour, which would start immediately upon ratification.
The pension withdrawal is even more onerous for workers. That is valued at $7.60 an hour for the first 12 months, rising to $8.20 an hour for the second half of 2010, according to Teamsters for a Democratic Union, the dissident wing of the 1.4 million-member Teamsters union.
In exchange, the union-represented workers at YRC will gain as much as 35 percent potential ownership of the $8 billion trucking company, which is saddled with as much as $1.47 billion in debt. YRC has lost nearly $2 billion in its last nine quarters. It is due to report second-quarter 2009 earnings figures the last week of July.
According to a tentative agreement by union labor leaders (before the rank-and-file vote), YRC agreed that the Teamsters should gain a sat on its board, bring in a turnaround consultant, offer stock options, bring back some work outsourced to foreign countries and limit the expansion of YRC Logistics outsourced work.
Whether this latest gambit is enough to save YRC is unknown. At this point, however, YRC Teamsters basically have little choice but to go along with what the company is proposing and hope for the best.
