Less-than-truckload (LTL) carrier YRC Worldwide Inc. and the leadership of the Teamsters union reached an agreement late Wednesday that calls for workers to make additional wage and benefit concessions in return for the company's resuming contributions to the workers' pension plan starting in mid-2011.
As part of the agreement, William D. Zollars, YRC's chairman and CEO, will retire once the company's restructuring is completed and a new CEO is named, according to a company press release. Zollars, 62, has run YRC since 1999. YRC said it is looking within and outside the company for a successor. Labor sources said Zollars' departure was a pre-condition to the union's accepting any additional concessions.
Under the agreement, which still must be ratified by the rank and file, the current contract will be extended for two years beyond its original March 31, 2013, expiration date. Union and non-contract employees will agree to 15-percent wage cuts in 2014 and 2015; those concessions were set to expire in March 2013.
Workers would get annual hourly increases in the 40- to 45-cents-per-hour range, minus the 15-percent givebacks. The company's health and welfare program will continue as it is currently structured.
YRC will resume pension contributions in June 2011, which is six months later than called for under the original agreement. However, YRC's contributions would be equal to only about one-fourth of the current hourly rate, which labor sources said is about $7 an hour. That would mean that workers would receive pension contributions equivalent to about $1.75 per hour.
In addition, the company will engineer what is known as a "reverse" stock split, by reducing the number of outstanding shares to 48 million from the current 1.2 billion. The idea behind reverse splits is to reduce the supply of shares in the marketplace, thus increasing demand for the shares that remain.
In a statement, YRC said the agreement is "designed to significantly improve the company's competitive position in the marketplace." The Teamsters took a darker view of events. "While we recognize that this plan contains wage and work rule concessions that are difficult to accept, members need to fully understand that if [the proposed agreement] is rejected, there is no doubt this company will go out of business," Tyson Johnson, head of the union's freight division, said in a statement announcing the proposal.
YRC had faced delisting from the NASDAQ market if it couldn't get its stock price above $1 a share for 10 consecutive trading days by Aug. 30. It has since received extensions from government regulators, however. YRC stock closed Sept. 30 at 25 cents a share, down 7 cents, or 22 percent, from the prior day's trading.
The proposal also calls for the creation of a new class of part-time cartage drivers operating on four shifts. It reduces vacation times by one week for union members with four or more weeks of vacation, and cuts coffee breaks from 15 minutes to 10 minutes in states where it is legal to do so.
Ballots are scheduled to be mailed to the rank and file on Oct. 7, with the tallying set for Oct. 28 and 29. It is believed the agreement, if ratified, will save YRC about $350 million a year, partially offsetting the $500 million it would have the cost the company to resume full pension contributions starting Jan. 1. Many observers believe that with the company struggling in a still-weak environment for the LTL industry, it would be unable to resume full pension payouts at that time.
The agreement is also conditioned on YRC's banks agreeing to convert by Dec. 31 their holdings in YRC's debt for the company's equity. A decision on New Year's Eve 2009 by the banks to swap $530 million in YRC debt for a billion newly issued shares of equity was widely viewed as keeping YRC out of bankruptcy at the time.
The Teamsters have retained a corporate turnaround expert who explained to local officials meeting today that the provisions in the proposed agreement will likely stabilize YRC and allow it to return to profitability, according to comments posted on the website of the Teamsters for a Democratic Union, a Teamster dissident group that has long clashed with mainstream union leadership and has taken a decidedly dim view of the YRC process.
In its comments, TDU was blunt about the importance of the rank and file's decision. "The future of YRC is on the line," it said.
