The Teamsters union will allow troubled trucker YRC Worldwide Inc. to forgo annual pension contributions for the next five years in return for the ouster of YRC Chairman and CEO William D. Zollars and a pledge from YRC's lenders to acquire more equity in the company in exchange for debt, according to a communique posted late Thursday on the website of a Teamsters dissident group.
The proposal, which appeared on the website of Teamsters for a Democratic Union (TDU), calls for Teamster leadership to ask YRC's unionized rank and file to agree to the five-year pension contribution waiver, which would save the company an estimated $350 million a year. Currently, YRC is scheduled to resume annual pension contributions on Jan. 1, 2011, after already obtaining an 18-month waiver on payments from its union workers.
In return, union leaders want YRC to terminate the contract of Zollars, who has been at the company's helm since 1999. In addition, the union will ask YRC and its lenders to negotiate more equity-for-debt swaps so banks would own more stock and reduce YRC's debt load, according to the communique.
At the end of 2009, YRC's lenders agreed to swap $530 million in debt for about 1 million shares of newly issued equity. The move was pivotal in helping YRC avoid a bankruptcy filing and possible dissolution.
The latest proposal would mark the third time in 18 months the company's 23,000 unionized workers have been asked to make concessions to keep YRC viable. Last year, workers agreed to two separate wage cuts totaling 15 percent, as well as to the pension waiver. The wage reductions are scheduled to run until March 2013, when the current National Master Freight Agreement governing employees in the less-than-truckload (LTL) industry expires.
Through a spokeswoman, YRC declined comment. Teamster officials were not available for comment at press time. TDU President Ken Paff, who has criticized Teamster leadership for agreeing to the concessions and has publicly predicted YRC would be unlikely to resume full pension contributions in January 2011, declined comment other than to say the information on the site was obtained from a reliable source within the Teamster hierarchy.
Though it has significantly cut costs to remain competitive, YRC, the nation's largest LTL carrier by sales, has struggled with sluggish demand in the LTL sector, cutthroat price wars, and lingering shipper concerns over its survival. YRC stock closed Sept. 10 at 28 cents a share.
David G. Ross, transport analyst for Baltimore-based Stifel, Nicolaus & Co., said it would be difficult to drum up sufficient support among YRC's rank and file for a third round of concessions. Ross noted that the second round of concessions, approved last August, narrowly passed by a 58-42 percent vote. The first round of concessions was approved by a vote of 77-23 percent.
Ross added that labor and management negotiators would be hard-pressed to convince YRC's lenders to acquire any more equity in a company with such uncertain prospects.
The Stifel, Nicolaus analyst also said YRC could experience further customer freight diversion until the vote takes place, which seems likely to be next month. With YRC's labor issues back in the headlines, rivals will aggressively court its customers by highlighting the company's financial instability, Ross said.
