Contract talks between ABF Freight System and the Teamsters union went into overtime this month, as the third-largest unionized less-than-truckload carrier and the Teamsters wrestle over concessions the company says it needs to survive.
The largest Teamsters employer, UPS, and trucking subsidiary UPS Freight are also deep in negotiations with the union over contracts that expire this summer. And the Teamsters will meet with YRC Freight, its largest LTL employer, this week to discuss plans to close 29 terminals, three distribution centers and shed 230 jobs.
Despite the surge in labor activity and looming contract deadlines, shippers are showing few signs of concern, because they see little immediate threat. The labor situation on U.S. highways is much different than on the U.S. waterfront, where a strike could shut down several ports along a coast and severely disrupt international supply chains.
Even at ABF, where talks resumed on April 8 on a contract to replace a pact that expired March 31, the company expects business as usual, and analysts report few customer defections to competitors. “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,” Stifel Nicolaus transportation analyst David G. Ross said in an April 1 note to investors.
ABF and the Teamsters extended the 2008 contract for 30 days, giving them until April 30 to reach a tentative agreement that could be put to a vote. “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,” Ross said.
Shippers always need to plan for different possibilities, but just how likely is a strike at ABF? Not very, one transportation consultant said. “There is nothing to be gained by the Teamsters from a strike,” said Satish Jindel, president of SJ Consulting Group. “ABF will be happy to buy extra time to keep negotiating. Shippers shouldn’t worry about freight not being handled or ABF not being there.”
In other words, keep calm and ship on until more details emerge from the talks.
The Teamsters know this isn’t the 1970s, let alone 1994, when the union struck 22 LTL carriers. That 24-day strike contributed to consolidation within the LTL industry and gave several nonunion carriers — including today’s market leader FedEx — inroads into a sector the Teamsters once dominated as longshore unions do the waterfront. A strike against ABF would cost the Teamsters pension money and wages and leave ABF weaker and less competitive, benefiting the carrier’s union and nonunion competitors and reducing Teamsters jobs.
There is still time for ABF and the Teamsters to reach an agreement, Jindel said — and if time runs out, ABF could ask for more. There has been no call for a strike authorization vote, which would be a red flag for shippers, Jindel said.
Ross suggested ABF and the Teamsters might agree to extend the 2008 contract until 2015, when YRC Worldwide’s contract expires. That option probably wouldn’t be palatable to ABF, however, which wants concessions to brings its costs down sooner rather than later. ABF lost $19.4 million in 2012.
“The current cost structure of wages, health and welfare and pension simply is not sustainable,” ABF said in December. “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 Teamsters are aware of ABF’s financial troubles. In recent years, the union has been willing to go far to help endangered Teamsters employers. Union involvement in the rescue of YRC Worldwide went well beyond three rounds of wage and benefit concessions. The union now controls two seats on the $4.9 billion company’s board, and its members own 25 percent of YRC’s stock. In many respects, the union set the terms for YRC’s still incomplete recovery.
“We understand (ABF) needs some relief,” Gordon Sweeton, co-chairman of the union’s National ABF Negotiating Committee, said in a March 15 statement. That doesn’t mean the Teamsters will give ABF exactly what it wants. “We are not willing to let the company destroy the standards we have fought for and established. While we have made some progress ... much remains to be done,” Sweeton said.
For both parties in these negotiations, and their customers, talking beats walking.