February 16, 2018

With only a few logs rolled, ABF, Teamsters already at loggerheads

Company warns of pension crisis that will require action; union wants to cap intermodal, purchased transportation expense, restore lost ground from 2013.

By Mark B. Solomon

It's still early, but talks to hammer out a collective-bargaining agreement between ABF Freight, the less-than-truckload unit of ArcBest Corp., and the 8,200 full-time Teamsters union members who work for the unit is shaping up to be just as difficult as the last go-round five years ago.

Negotiations resumed on Monday in Kansas City after two rounds of talks that moved the needle a bit, but not by much. ABF said in a memo last Friday that progress had been made on unidentified "mutually agreeable" language, but that "significant issues" remain to be discussed. The memo did not mention the core issues still on the table, but they no doubt mean employee wages, and perhaps more important, the cost of the company's pension plan, which is significantly higher than that of YRC Worldwide Inc., ABF's only unionized rival. The five-year ABF-Teamster contract expires March 31.

The two sides first exchanged proposals on Dec. 18, with the Teamsters' freight division seeking cost-of-living adjustments for each year of the contract and ABF calling for an across-the-board wage freeze effective July 1, 2018. The company has agreed to restore one week's vacation for union members that was eliminated in the 2013 contract, with the condition that the two sides identify cost savings to offset the increased expense associated with adding back the vacation week.

As part of the 2013 agreement, the rank and file took an up-front 7-percent wage cut that was to be restored in increments over the contract's life. ABF said that has happened, though some on the Teamsters side aren't so sure. Ken Paff, national organizer of the Teamsters for a Democratic Union (TDU), a dissident group that clashes regularly with union leadership, said the increases were actually cost-of-living adjustments pegged to levels that were adjusted downward once the 7-percent cut took effect. As a result, Paff argued, the front-ended cuts were not restored at all. ABF vehemently disagrees with that rationale.

ABF Teamsters have a reputation for not going quietly, as evidenced by the set-to through the summer and fall of 2013, when about 1,800 workers in the Midwest refused to sign off on their local supplements attached to the national master contract. The main contract had been ratified in June, but couldn't take effect until all supplements were ratified. The members threatened to authorize a strike vote, which union leaders warned could cause such a disruptive ripple effect that it would force ABF to shut down. The members backed off, however, clearing the way for the supplements to be ratified and the current contract to take effect.

The dynamics are different this time around. The U.S. economy and freight demand are in better places than they were in 2013. Less-than-truckload (LTL) carriers, which were emerging from a disastrous rate-cutting cycle in 2013, have since discovered pricing discipline, and along with perkier demand, that has emboldened them to raise prices repeatedly in recent years. Ernie Soehl has replaced Tyson Johnson as head of the union's freight division, a change which has a "jury's still out" feel to it.

The wild card is Fred Zuckerman, head of Teamsters Local 89 in Louisville, Ky., and leader of a movement called "Teamsters United." Zuckerman came within a whisker of defeating incumbent James P. Hoffa in the union's 2016 presidential election, and Teamsters United won six seats on the union's 24-member board.

Zuckerman, a voluble and aggressive leader, is expected to play a major role in shaping the union's ideology in talks with ABF and in the much-larger contract negotiations underway with UPS Inc., the Teamsters' largest employer, whose contract with the union expires in August. ABF Teamsters voted overwhelmingly for Zuckerman in the 2016 election, according to Paff.

On Tuesday, Teamsters United announced on its website that locals in Chicago; Louisville; Columbus and Dayton, Ohio; Kansas City; and Harrisburg, Pa., among others, voted to authorize Teamsters leaders to call a strike if the situation warranted it. A strike authorization vote is procedural, and doesn't automatically lead to a walkout.

On the site, the group put ABF on notice that "we are coming together to restore what we lost in the last contract and to win improvements." It added that ABF "needs to see that we will back our union negotiators when they fight for improvements, and that we will vote `No' if they settle short and try to sell us another substandard deal."


The fate of the contract could very well turn on the pension gap between ABF and Overland Park, Kan.-based YRC. As part of a 2009 agreement to keep YRC solvent, its rank and file, who are also represented by the Teamsters, took draconian pension cuts, dropping their benefit to the equivalent of $1.75 an hour. The ABF pension, by contrast, provides benefits equal to $7.83 an hour, ABF said in the memo. The YRC-Teamsters collective bargaining agreement was extended for five years in 2014 and expires in March 2019.

The pension discrepancy, along with generous health and welfare benefits and wages that "are at the top pay rates" of the LTL industry, puts ABF at a cost disadvantage when competing for business, according to the memo.

Another problem facing Fort Smith, Ark.-based ABF is that about half of its pension payments go to retirees who never worked for the company. That's because ABF was part of a multi-employer pension scheme negotiated decades ago when the trucking industry was heavily unionized, regulated, generally in good financial health, and chock-full of carriers. Under the scheme, companies in the multi-employer plan were required to contribute to the pensions of each other's workers, and would continue to do so even if truckers who had employed some of those workers went out of business.

ABF, which said it has made $1 billion in pension contributions in the past decade and $750 million since the last contract, said "very little, if any, of this money" will go toward the rank and file's retirement benefits. In words that echo similar warnings made by ABF in the months leading up to the 2013 compact, the company said in the memo that unless the pension issue is resolved, "we must find other ways to achieve an affordable contract."

For its part, the union wants to establish a classification of "utility employees," who would function as cartage jacks-of-all-trades and be paid an hourly premium over other workers. It has demanded that ABF's use of rail intermodal and purchased transportation services—the latter being services not performed by union drivers—be capped at 20 percent of total annual miles, and that the level of purchased transportation not exceed 4 percent of ABF's total annual mileage. The union also proposed that for every mile driven by an outside carrier, 10 cents would go into an account whose proceeds would be equally disbursed to bargaining-unit drivers by Jan. 30 of each calendar year of the contract.

The Teamsters are sensitive to initiatives proposed by any carrier that hint at siphoning away driving work from bargaining-unit employees. The union opposes any initiatives by companies to use such equipment as autonomous vehicles and drones, though it recently withdrew its opposition to UPS using them.

In June 2012, ArcBest, then known as Arkansas Best Corp., acquired Panther, an expedited delivery provider, in an effort to add services beyond asset-based LTL. In 2013, ABF's "premium logistics and expedited freight" segment, which was composed of Panther, posted revenue of $246.8 million, a bit more than 10 percent of the company's $2.3 billion in total revenue. In 2017, the "ArcBest" unit, which is made up of Panther and the company's truckload and dedicated truckload businesses, generated revenue of more than $706 million, about 25 percent of $2.82 billion in overall revenue. The company does not break out revenue streams between Panther and the two truckload operations.

The core LTL operation generated a shade over $1.99 billion in revenue last year; in 2013, the unit's revenue was $1.76 billion.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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