As talks between the Teamsters union and ABF Freight System head into overtime this month, customers are showing the less-than-truckload carrier some loyalty, according to Stifel Nicolaus transportation analyst David G. Ross. But he said LTL shippers need to start drafting contingency plans in case the talks end in a strike.
“Shippers have not experienced a work stoppage in the LTL industry since 1994, so we do not believe they expect one now, which is why there has been little freight diversion seen to-date,” Ross said in an April 1 note to investors. “If there is no contract signed by the last week in April, though, we believe shippers need to have contingency plans in place to prepare for the possibility of a strike,” he said.
A strike is the most extreme of several possibilities shippers should consider as the Teamsters and the nation’s third-largest unionized trucking company return to the bargaining table this month.
The carrier and union could agree on a second contract extension if they fail to come up with a tentative deal for ABF’s 7,500 Teamsters before time runs out on the current extension at the end of April, Ross noted. The contract was extended 30 days from the original March 31 deadline last week.
Ross also suggested ABF and the Teamsters might agree to extend the current contract until 2015 and hold joint negotiations on a new National Master Freight Agreement with YRC Worldwide. That option wouldn’t be very palatable to ABF, however, which wants significant wage and benefit concessions from the Teamsters this year to bring its costs closer to those of YRC Freight and non-union competitors.
The talks have been a battle from their start in December, when the Teamsters slammed increases in executive pay at ABF and asked for a wage hike while the trucking company blamed the highest wage and benefits costs in the LTL sector and strict work rules for its continuing financial troubles.
“The current cost structure of wages, health and welfare and pension simply is not sustainable,” the company said. “If the company is not able to dramatically lower its union labor costs and gain flexibility ... extensive changes to the network including closure of terminals and distribution centers will occur,” the company warned in a Dec. 19 statement.
Contract or no contract, transportation consultant Satish Jindel, president of SJ Consulting Group, believes those network changes may be necessary to improve ABF’s density and financial results. Many of its largest competitors, including FedEx Freight, Con-way Freight and YRC Freight, already have re-engineered their LTL terminal networks.
The Teamsters characterized negotiations as “difficult and complex,” with ABF seeking pay and benefit concessions and more operational flexibility. “We understand the company needs some relief,” Gordon Sweeton, co-chairman of the union’s ABF negotiating committee, said March 15. “However, we are not willing to let the company destroy the standards we have fought for and established.”
Looming over negotiations, which are set to resume the week of April 8, is an April 10 hearing for the lawsuit ABF filed against the Teamsters challenging the three rounds of concessions the union granted YRC Worldwide in 2009 and 2010. The U.S. Court of Appeals in St. Louis will hear ABF’s challenge to an August 2012 U.S. District Court decision that dismissed its lawsuit, originally filed in 2010.
ABF contends the YRC concessions were illegal as they weren’t extended to ABF under the National Master Freight Agreement. The Teamsters contest that argument, and so far have won most of the court battles. The original suit was dismissed, remanded to the district court after a successful appeal, and dismissed again. ABF hopes the appeals court will grant it a third round in district court.
In the meantime, “ABF reassures all customers that it remains business as usual while talks continue,” the company said March 28.