The Teamsters union says it is willing to discuss labor costs when contract talks with ABF Freight System begin Dec. 18 — but not just union labor costs.
“Analysts and ABF management have focused almost entirely on Teamster labor costs, but not management labor costs,” the union said in a Dec. 14 statement.
The union pointed to a 2011 pay hike for the CEO of ABF parent Arkansas Best, Judy McReynolds. Her salary climbed $75,000 to $525,000 a year in her second year as CEO, and her total compensation rose to $1.35 million, according to company reports filed with the U.S. Securities and Exchange Commission.
That occurred during a period when McReynolds and her management team steered Arkansas Best and ABF back toward profit after a $127.9 million loss in 2009. Arkansas Best lost $32.7 million in 2010 before posting a $6.8 million profit in 2011. However, the less-than-truckload carrier has struggled to stay in the black in 2012. The Fort Smith, Ark.-based company’s profit dropped 47 percent in the third quarter to $6.52 million, compared with a $12.27 million profit a year earlier.
The shot over executive pay signals “aggressive” bargaining ahead when the Teamsters sit down with ABF. The union and the sixth-largest less-than-truckload carrier begin negotiations for a new contract against a backdrop of weakening freight demand, rising costs, strong LTL competition and broad labor unrest in the U.S. The company wants to cut its labor costs, which are considered among the highest in the LTL sector. “Our goal is to reach an agreement that enables us to better compete in a rapidly changing freight transportation market,” ABF President and CEO Roy Slagle said in a statement when the talks were announced.
The Teamsters aren’t likely to accept attempts to place all the blame for ABF’s financial struggles on comparatively high union wages. “It is important to note that ABF generates the highest revenue per shipment in the industry precisely because it has some of the industry’s best drivers and dockworkers,” the union said Dec. 14.
The talks, which will cover about 7,500 ABF Teamsters, start at a time when a battle over right-to-work legislation and limits on collective bargaining in several states are riling and motivating rank-and-file union members. They also parallel Teamsters talks with UPS, the nation’s largest Teamsters employer and owner of ABF rival UPS Freight, the fourth-largest LTL carrier, according to SJ Consulting Group.
And they come at a time when strikes and the threat of strikes at the nation’s ports are roiling shipper supply chains, bringing labor to the fore in logistics.
The ABF-IBT negotiations aren’t likely to be as contentious as those involving longshore workers and terminal operators on both the East and West Coasts. In recent years, the Teamsters have proved willing to work with struggling trucking companies, offering concessions to keep trucks and drivers rolling. The union agreed to three rounds of pay and benefit concessions at ABF rival YRC Worldwide that reduced union wages at ABF rival YRC Freight 15 percent through 2015.
Arkansas Best is suing the Teamsters over those concessions, claiming they violated the National Master Freight Agreement and seeking $750 million in damages. A federal judge dismissed the case for the second time in August, but ABF appealed, filing a 75-page brief Oct. 29 in the U.S. Court of Appeals for the Eighth Circuit.
Union and company negotiators will also remember ABF’s failure to win concessions from Teamsters in 2010, even when tied to a gain-sharing plan. In May 2010, ABF’s Teamsters employees rejected a package of concessions by 56 percent to 44 percent, voting against the recommendations of their union.
That concessionary proposal would have saved the company $60 million to $75 million a year, and probably returned ABF to profitability a year earlier.
“We took a proactive approach to help ABF get through the worst economic recession since the Great Depression, but our members have rejected the plan," Tyson Johnson, director of the union's freight division, said at the time.
It’s not a given that those employees will be any more willing to take a deep pay cut now, when ABF has a thin profit and Arkansas Best is growing by acquisition.
The outcome of the ABF-IBT negotiations could have implications for many smaller union carriers and for the future of the much-battered National Master Freight Agreement — if the multi-employer contract has a future. ABF fought hard to get out of the NMFA in 2008, only to be forced to accept identical terms to the YRC Worldwide contract. That gave ABF the basis for a legal claim to still be part of the NMFA.
Now the company will get to negotiate its own contract with the Teamsters, but the union wants a two-year contract, rather than the traditional five-year pact. That would mean ABF’s contract expires just as YRC’s contract ends, raising the possibility the Teamsters hope to negotiate a true multiemployer NMFA in 2015 — even if those employers are limited to YRC Worldwide and ABF Freight.