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.
During 2009, as YRC's financial situation grew more precarious, its 35,000 Teamster employees agreed to two wage reductions and an extraordinary 18-month freeze on YRC's pension contributions.
Throughout the year, the union's leadership actively participated in YRC's financial restructuring, acting in an advisory role that was considered well outside the union's traditional box.
Then, as YRC faced a New Year's Eve deadline to execute a swap of $530 million in debt for 1 billion shares of new equity or else confront bankruptcy and a possible shutdown, Teamster General President James P. Hoffa put very public pressure on several financial institutions, notably the colossus Goldman Sachs & Co., to stop buying arcane derivatives called "credit default swaps" that were essentially bets that YRC would default on its obligations and file for bankruptcy protection.
Hoffa pulled out all the political stops, shrewdly framing the debate as a choice between preserving thousands of middle-class jobs and letting greedy financial firms scavenge for a few extra dollars in profits. Facing a potent backlash from lawmakers and regulators already angered over the industry's role in causing the financial meltdown, the firms caved. Not only did they stop buying the derivatives, but they bought up enough YRC notes to enable the debt-for-equity exchange to succeed.
To be sure, YRC's burden had already been eased by the remarkable forbearance of its banks, which threw the company numerous financial lifelines. But the flexibility of YRC's lenders would have meant little, experts said, if not for the concessions of its rank and file, and the efforts of Hoffa and other union leaders to adopt a collegial attitude toward YRC instead of a confrontational one.
"If it wasn't for the IBT, YRC would not be here," says Michael H. Belzer, associate economics professor at Michigan's Wayne State University and one of the nation's leading experts on trucking labor relations. Belzer says he doesn't recall the Teamsters or any trade union playing such an active and pivotal role in ensuring a company's survival. He called Hoffa's 11th-hour push to force Goldman's hand on the derivatives transactions an "amazing" achievement.
Rough road ahead
But it came at a price. The wage cuts and the suspension of pension contributions will cost YRC's rank and file about $1.5 billion through 2013, according to a 2009 estimate from investment firm Stifel, Nicolaus & Co. As with all YRC common shareholders, the Teamsters' original equity stake was wiped out following the debt-for-equity swap. Though YRC workers are expected to receive options worth between 30 and 35 percent of the new equity, there is considerable doubt as to its value.
One analyst, Jon A. Langenfeld of Robert W. Baird & Co., values YRC stock at zero. YRC stock closed March 8 at 49 cents a share, and the company faces delisting from the Nasdaq stock exchange if it can't get its stock above $1 a share for 10 consecutive days between now and Aug. 30.
YRC is scheduled to resume pension payments in January 2011, at a cost of about $15,000 for the year per Teamster employee. Given the weak market for less-than-truckload (LTL) services and continued cut-throat pricing, some wonder if a company saddled with hundreds of millions in losses can meet an estimated $500 million pension commitment next year.
YRC burned through $72 million in cash during 2009's fourth quarter as its financial crisis was coming to a head, according to New York-based research firm Wolfe Research. YRC's cash burn has not worsened in 2010, the firm said. However, it noted that worried shippers that diverted their freight from YRC to other carriers are not "flocking back" to the carrier. Tonnage losses, though stabilizing somewhat from 2009 levels, "remain daunting," Wolfe said.
YRC declined to comment other than issuing a statement through a spokeswoman that it is "contractually obligated" to make the pension payments.
Ken Paff, the long-time head of Teamsters for a Democratic Union (TDU), a relatively small but influential dissident group that has clashed often with Hoffa during his 11-year tenure, is pessimistic about YRC's ability to resume full contributions in January. "You want to bet the mortgage on it?" Paff asked with characteristic rhetorical bluntness. "Because I hate to see you become homeless."
Charles W. Clowdis Jr., a long-time trucking executive and now managing director, North America for the global trade and transport unit of consultancy IHS Global Insight, says YRC's pension challenges are a frequent topic of conversation with shippers across the nation. Clowdis says he doubts that YRC will be able to generate the needed funds through its earnings power and that it may have to resort to borrowing to raise the capital.
Hoffa is unapologetic about the process and the outcome. "We feel we did the best given the circumstances of balancing need, preserving jobs, and maintaining decent wages and health benefits," Hoffa said in an interview with DC Velocity. "It is easy to second guess, but I don't think you can put a price tag on livelihoods of 30,000 families."
Hoffa declined comment on whether YRC would be able to resume full pension contributions next year. He said the company has made its operations as lean as possible and is in a "good position to take advantage of the upswing" in freight volumes when it occurs.
Hoffa said the union's overarching goal has been to help YRC "bridge the recession" and that steps such as the pension freeze were needed to "provide the company time to weather the storm."
Dubious anniversary
All of this has been playing out against the backdrop of a dubious anniversary for organized labor in the trucking business. In 1980, Congress deregulated the industry, freeing truckers to compete against each other to provide the best service at the lowest price. The open market soon would give shippers the upper hand in rate negotiations with carriers, a grip they've never relinquished.
Deregulation's supporters claim that it has fostered innovation and lowered costs, twin boons to the U.S. economy and its citizens. However, the post-deregulation years have been a nightmare for Teamster truck labor, as company failures, bankruptcies, and consolidations thinned the union's ranks and diminished its influence.
At its peak in the 1970s, membership in the Teamsters' freight division—long considered the core of the union—stood at about 400,000, about 20 percent of total IBT membership. Today, that number has dwindled to about 70,000, with roughly half employed at YRC. The freight division accounts for 5 percent of the union's 1.4 million members.
Hoffa acknowledges that deregulation "changed the rules of the game and has decimated the industry." But he disputes the notion that the freight division is in permanent decline, noting that the Teamsters added more than 12,000 freight members last year when workers at UPS Freight, a unit of UPS Inc. formerly called Overnite Transportation Co., joined the ranks.
Ticking time bomb
The crisis at YRC has exposed what some consider a ticking time bomb for truckers and workers: the fate of the multi-employer pension program established by Congress and commonly used in the trucking industry. An arrangement between a union and at least two employers usually in a common industry, a multi-employer plan requires member companies to fund the pensions of workers and retirees not only from their companies but from other firms participating in the plan.
The program, whose main objective was to allow workers to change employers without losing their vesting privileges, worked fine as long as there were enough unionized trucking firms to spread the cost around. However, as company failures and consolidations winnowed the universe of unionized firms, the burden fell on those remaining to absorb an even larger portion of total retirement obligations, including obligations to retirees who had worked at now-defunct entities.
As a result, YRC and rival ABF Freight System, which employ most of the Teamster workers covered under the main freight agreement between the union and industry, are liable for the pension obligations of retirees who worked for competitors that have long since closed their doors and who were never employed at either YRC or ABF.
In 2007, UPS Inc., the nation's largest transport company and biggest Teamster employer with 240,000 members, negotiated a $6.1 billion pre-tax payout to remove 44,000 of its full time employees from the Teamsters' Central States pension fund, one of the union's largest. UPS withdrew from the program because it did not want to face the future liabilities of paying into the Central States fund for its employees and for workers at other companies.
William D. Zollars, YRC's chairman, president, and CEO, has been actively pushing for an overhaul of the nation's multi-employer pension program. In addition, YRC and the Teamsters have thrown their support behind House legislation sponsored by Reps. Earl Pomeroy (D-N.D.) and Patrick Tiberi (R-Ohio), and a similar bill introduced in the Senate by Sen. Bob Casey (D-Pa.), which would shift the pension liabilities of retirees from failed firms away from the Teamsters and to the Pension Benefit Guaranty Corp. (PBGC), a federal corporation that protects more than 29,000 pension plans.
However, the union has insisted it will not support any bill that doesn't maintain full payouts to so-called orphan Teamsters, employees who worked for companies no longer in business but who have accrued benefits all or in part through their employment at now-defunct firms. Under current PBGC rules, workers or retirees with orphan pensions are eligible for a maximum payout of $1,080 per month. That is about one-third of the top payout received by a Teamster member with a non-orphan pension and identical years of service.
In a February newsletter, TDU made clear where it stands: "It's up to our Teamsters Union to make sure that any bill that is passed would guarantee that the PBGC would pay full pensions and would have sufficient funding to do that." Both the Pomeroy-Tiberi bill and the Casey bill would provide those protections.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.