YRC Worldwide Teamsters in western Pennsylvania early this week removed the last barrier to a new five-year labor contract, approving the only supplement that remained to be ratified. That means the contract, approved by a 60 percent margin on May 3 at national less-than-truckload (LTL) carrier YRC Freight and regional LTL operators New Penn and Holland, now takes effect.
Customer flight in the months before the contract was approved contributed to a first-quarter loss for YRC Worldwide. With labor peace secured through 2024, the sixth-largest US trucking operator is working to win those customers back and restore and expand profits. “As we move through 2019, we will continue to prioritize yield over tonnage,” CEO Darren Hawkins said.
“Having a five-year agreement is a very positive event for YRC Worldwide, supporting a more market-competitive wage and benefit package for our employees while providing operational benefits that will allow us to provide reliable and efficient services to our customers,” Hawkins said in a statement Wednesday. Those customers already are returning, he said.
“Once the tentative agreement came out, we did start seeing the [tonnage] declines lessen,” Hawkins said during a May 8 earnings call, when YRC reported a $49.1 million net loss on $1.18 billion in total revenue. “We did the right things,” in terms of keeping shippers abreast of the contract talks, Hawkins said. “We hope that our customers reward us for that.”
During the first quarter, YRC’s national and regional subsidiaries saw LTL freight tonnage drop. Volume was down 5.8 percent year over year at national LTL carrier YRC Freight and down 7.5 percent at regional carriers Holland, New Penn, and Reddaway. At YRC Freight, tonnage dropped 5.6 percent in January, 5 percent in February, and 6.5 percent in March.
That decline was not just from business shifted to other carriers as the March 31 contract deadline approached. Severe weather hit YRC Worldwide’s LTL networks hard during the quarter, especially at Midwestern carrier Holland. YRC also has been purging less-profitable freight from its networks. Excluding fuel surcharges, YRC Freight’s yield rose 3.1 percent in the quarter.
Rate increases gained in first-quarter contract renewals averaged 6.7 percent at YRC Freight and 5.4 percent at the regional carriers, chief financial officer Stephanie Fisher said during the earnings call. That’s another sign of the growing gap between the LTL pricing environment and truckload rates, which are rising much more slowly and are likely to decline as 2019 shapes up to be a slower, softer year than the “annus mirabilis” for truckers in 2018.
Laying a foundation for network improvement
The new contract also provides a foundation for YRC Worldwide’s plans to optimize its four LTL networks. Late last year, YRC Worldwide named Holland president Scott Ware to its newly created role of chief network officer. “Scott is leading the new holistic view of our network and has been executing on ways we can create efficiencies across all of our companies,” Hawkins said of the move.
“The new labor contract provides key components to being able to launch operational improvements that we expect to deliver $60-80 million in network efficiencies and cost reductions in 2020,” Hawkins told Wall Street analysts. One of those components allows YRC Worldwide to use non-commercial driver's license (CDL) city pickup-and-delivery drivers operating box trucks.
“This will allow us to replace costly third-party cartage carriers, reduce destination terminal inventory, and improve on-time service, all while developing a pool of future CDL drivers,” Hawkins said. More efficient work rules for terminal dock and yard operations will also help the company speed up national and regional shipments and retain employees, he said.
“New job entrants are looking for a career path,” Hawkins said. “We can hire employees as part-time dockworkers, advance them into full-time non-CDL dockworker or driver [jobs], and then through our internal driving schools develop them into certified CDL drivers.” The new contract also allows for increased purchased transportation for additional capacity.