With one-month reprieve, ABF and its pugnacious rank-and-file retreat to separate corners

Truckingboards.com is a lively forum where truckers, who are normally opinionated people, go online to vent on the issues of the day. One recent post, from the handle of "Docker," who ostensibly is a unionized employee at ABF Freight System Inc., contained the image of a political button inscribed with the warning that "We Don't Want to Strike, But We Will!"

That could easily be dismissed as an idle, even foolish, threat since a Teamster strike could push the financially troubled less-than-truckload (LTL) carrier, which has lost about $230 million since 2009, over the edge, with thousands of jobs going with it. Yet it should be remembered that the 7,500 or so Teamsters employed at Fort Smith, Ark.-based ABF have been known to march to their own collective drummer.

In May 2010, while their union brethren at chief rival YRC Worldwide Inc. agreed to three separate wage and benefit concessions to drive down YRC's costs and keep it afloat, ABF's rank-and-file rejected similar givebacks that management said were needed to remain competitive. In the process, it defied its own union leadership that had negotiated the concessions.

Nearly three years later, ABF and its Teamster workers face each other again. The current five-year contract expired March 31 but last week was extended until April 30, giving both sides more time to talk. The union said in a terse statement that "slow progress continues to be made" and that "significant issues need to be discussed." The company, in an equally terse communiqué, said that both sides "continued to make progress" towards an agreement. Talks will reconvene sometime next week.

At this time, there is scant evidence that ABF customers are diverting their freight. Part of it could be shipper ennui; there hasn't been a strike in the LTL industry since 1994, so shippers may be unconcerned that this dispute would break the pattern. Part of it could be that shippers of hard-to-handle freight have come to rely on ABF's skills in that area and are loath to look for an alternative.

But as the calendar turns with the big issue—namely wage and benefit concessions—yet to be discussed, it would appear that prudence would be in order for ABF shippers. David G. Ross, transport analyst at investment firm Stifel, Nicolaus & Co., said in a research note today that shippers should have contingency plans in place by the last week of April if a contract isn't signed by then.

For now, no one seems willing to budge. ABF warned in December that it would be forced to make "extensive changes" to its network if it can't cut costs and increase flexibility through a new labor deal. The company insists that it needs a lower operating structure to compete for business it now has to turn away. The union, meanwhile, appears loath to agree to major concessions until it has evidence that ABF has its operational house in order. ABF has the highest labor costs of any LTL carrier, but critics say its terminal network is too large and its freight density too light to be profitable under the current structure.

VARIOUS OPTIONS
There are several bargaining options available to both sides. Those include an extension of the existing contract, even one as long as two years, a timeframe that would coincide with the 2015 expiration of YRC's contract. Operations could continue without a contract, a dicey scenario for both sides; a union can strike a company without notice, though at the same time it can be decertified and lose access to hard-won contractual benefits. And there could be a strike on May 1.

No one knows how efficiently the marketplace would absorb ABF's freight if it were dispersed in the event of a work stoppage. Charles W. Clowdis Jr., managing director of transportation advisory services for consultancy IHS Global Insight, said customers shouldn't have trouble finding alternative transport services. Clowdis added, however, that he wouldn't be surprised if various carriers impose emergency surcharges to move ABF's goods.

The last time the LTL sector dealt with a major dislocation was in 2002 when the venerable carrier Consolidated Freightways, unable to pay its insurance premiums, suddenly went belly up. After a brief period of indigestion, however, other carriers picked up the slack.

Between now and month's end, several events will take place that could influence the talks. On April 10, a federal appeals court in St. Louis will hear arguments in ABF's long-running suit against YRC and the Teamsters over the three separate concessionary agreements. ABF argues the agreements were illegal because they circumvented the National Master Freight Agreement (NMFA), the compact that governs trucking labor relations.

ABF sued the Teamsters and YRC in November 2010, asking that the compacts be made null and void and that YRC's cost structure be returned to NMFA status. ABF also asked for $750 million in damages. However, ABF has made little headway in the courts, and some believe its resources would be better spent on contract bargaining and not in pursuing a legal fight against the union it is trying to come to terms with.

On April 19, YRC Freight, YRC's long-haul LTL unit, will meet with leaders of Teamster locals to discuss the company's proposal to rationalize its network by closing three breakbulk terminals and consolidating 29 smaller, "end-of-line" terminals used as freight pickup and final delivery points. The move, designed to reduce freight-handling costs and expedite goods movement, could save YRC about $30 million a year.

UPS Freight, the unionized LTL arm of UPS Inc., is also in the process of negotiating its own contract with the Teamsters. The talks are running concurrently with the much-larger negotiations involving UPS and the union's 250,000-member small-package division. UPS Freight has about 15,000 Teamster members, though their contract does not fall under the NMFA umbrella.

UPS has made no secret of its desire to reach agreements on both contracts long before their July 31 expirations. UPS Freight negotiations are scheduled to resume in mid-month.