That didn’t take long.
Negotiations between ABF Freight System and the International Brotherhood of Teamsters hit a rough patch before the first formal day of talks began on Tuesday (Dec. 18). Talks for the first round concluded Wednesday, with talks expected to resume in January.
The existing labor contract will expire March 31, for the about 7,500 Arkansas Best employees represented by the Teamsters. The largest subsidiary of Arkansas Best is ABF Freight System, one of the largest less-than-truckload carriers in the U.S. Most of the 7,500 are drivers but the union membership also includes dockworkers, mechanics and office staff. Arkansas Best employs more than 10,000.
A cordial start to negotiations would have been a surprise.
LEGAL, EARNINGS HISTORY
Arkansas Best has twice sought legal action against the Teamsters as part of a $750 million lawsuit. Arkansas Best has alleged that wage deals between the Teamsters and YRC, a competitor of ABF Freight, violated a National Master Freight Agreement (NMFA). The NMFA, implemented April 1, 2008, was designed to create equal labor costs and other benefit payments among trucking companies with drivers represented by the Teamsters.
The lawsuit, first filed in November 2010, was recently dismissed a second time by U.S. District Court Judge Susan Webber Wright (Eastern District of Arkansas). Arkansas Best officials say they will again appeal the dismissal to the U.S. Eighth Circuit Court of Appeals (St. Louis).
Arkansas Best has focused on reducing labor costs to remain competitive. For the first nine months of 2012, the company posted net income of $197,000, which is below the $4.929 million in the same period of 2011. Total revenue during the first nine months was $1.528 billion, ahead of the $1.444 billion in the same period of 2011.
The company posted 2011 net income of $6.159 million, a huge swing from the $32.693 million loss during 2010. The 2011 financials marked the end of two consecutive years of income losses.
On Dec. 14, the Teamsters National Freight Industry Negotiating Committee (TNFINC) issued a report saying the focus on costs may need to be redirected.
“For example, analysts and ABF management have focused almost entirely on Teamster labor costs, but not management labor costs,” noted the TNFINC report.
Continuing, the Teamsters update noted: “Cash compensation (salary, incentive plan, etc.) for executive leadership at ABF’s parent, Arkansas Best Corp. (ABC), has not suffered as a result of the 2011 performance of its largest subsidiary. For example, in the second year of her leader- ship, ABC CEO Judy McReynolds’ cash compensation (non-equity) grew by over 50 percent from 2010 levels, according to U.S. Securities and Exchange Commission (SEC) documents.”
ABF officials responded Wednesday by saying they were “disappointed” to see the Teamsters push out “misconceptions” prior to the start of negotiations.
“For the first time, ABF is negotiating for its own national contract, creating an unprecedented opportunity for both parties to work together and fix the labor cost problems that have led to $230 million in losses since 2009,” noted the ABF statement. “The company’s goal is to secure a new contract that allows ABF to substantially lower its costs, become more flexible and better compete in a rapidly changing marketplace that has seen hundreds of union carriers go out of business and non-union carriers proliferate.”
The lengthy statement from ABF included the following points.
• Comparing the combined ABC CEO salary and incentive to our publicly traded large LTL peer companies, Judy McReynolds’ salary and incentive was 58% of the average of the other companies in 2011.
• All of the compensation of ABF officers including McReynolds adds up to less than one-half percent of ABF's costs.
• ABF Teamster employees are at the highest levels of pay relative to all of their peers in the LTL industry in total compensation including wages, health and welfare, and pension.
• YRCW’s CEO in 2011 was paid $2.5 million in total compensation for just five months, nearly twice what Arkansas Best’s CEO was paid in the same time period. Two Teamster representatives sit on YRCW’s board of directors, which approved the $2.5 million 2011 compensation package for the YRCW CEO.
• Since 1999, six out of 10 union LTL jobs have disappeared while non-union jobs have increased 160%.
• Following a peak of 500,000 Teamsters covered by the National Master Freight Agreement in the 1980s, ABF is now negotiating on behalf of just 7,500.
“After 90 years in business, ABF looks to the Teamsters to work from factually based information and help craft a much better contract so that a vibrant, healthy ABF can continue to provide good jobs and superior customer service for another 90 years. Without such an agreement to lower costs and create much greater flexibility, continued market share and job loss will certainly result,” concluded the ABF statement.
The union concluded its Dec. 14 statement by saying it “wants nothing more than for ABF to gain market share” and succeed.
“We are looking for meaningful bargaining proposals and discussions that address the realities of this industry while protecting good, full-time jobs,” said Gordon Sweeton, co-chair of the ABF negotiating committee for the TNFINC. “We do not believe, however, that it’s a zero-sum game where cost control is the only issue at hand.”