William B. Cassidy | Oct 21, 2010 5:50PM EDT
YRC Worldwide is reportedly prepared to shut down subsidiary New Penn if Teamsters at the regional carrier reject proposed wage and pension concessions.
New Penn would be merged into YRC, the national less-than-truckload unit of YRC Worldwide, according to a change of operations proposed by the company.
"I am hopeful that this proposed change of operations ultimately will not be necessary," Jack Peak, senior vice president of labor relations and employment law, said in an Oct. 14 letter to union officials obtained by The Journal of Commerce.
If Teamsters at New Penn reject the concessions, however, their company would have "a significantly higher cost structure" than other YRC subsidiaries, he said.
"The company would not be in a position to maintain New Penn as a separate operation," Peak wrote to Teamsters General President James P. Hoffa.
The letter underscores just how hard the nation's largest trucking operator is willing to push to win approval of the concessions. New Penn and its regional sister companies Holland and Reddaway have outperformed nationwide YRC in recent quarters. YRC Worldwide Chief Operations Officer Michael J. Smid earlier warned a 'no' vote could shut down the entire company.
"The bottom line is that we have no future with a 'no' vote," said Smid, who is also president of the company's long-haul less-than-truckload carrier YRC.
The Lebanon Daily News, New Penn's hometown newspaper, first reported the Peak letter and proposed merger. The Teamsters union confirmed YRC Worldwide filed a proposed change of operations but didn't disclose its contents.
The company declined a request for comment from The Lebanon Daily News.
Union members throughout YRC Worldwide are voting on changes to the National Master Freight Agreement that would extend wage and benefit concessions.
The "restructuring agreement" negotiated with the Teamsters would extend a 15 percent wage cut approved last year for two additional years, through 2015.
The company would resume contributing to its union employee pensions in June, but at only 25 percent of the amount it paid into those plans in July 2009.
Analysts say the agreement would save YRC Worldwide as much as $350 million a year. Without it, it could run out of cash by the third quarter of 2011.
New Penn could pose a challenge to YRC Worldwide, as its Teamsters at first rejected last year's concession package before approving it in a second vote. Its employees belong to a different bargaining unit than those at YRC and Holland.
Ballots mailed to union members Oct. 7 and will be counted Oct. 28 and 29.
-- Contact William B. Cassidy at wcassidy@joc.com.