After nearly a year of difficult negotiations, ABF Freight System Inc. and the Teamsters union finally have a collective bargaining agreement.
The five-year pact was ratified late yesterday, less than 48 hours after about 1,800 unionized ABF cartage workers in the Midwest voted not to authorize their leaders to call a strike that could have paralyzed the less-than-truckload (LTL) carrier and resulted in the loss of 7,500 jobs. The contract takes effect Nov. 3 and runs through March 31, 2018.
The compact calls for an immediate 7-percent wage reduction, which would be recouped in increments over the life of the contract. For the first time, ABF can subcontract out roadwork, at least up to the equivalent of 6 percent of its total miles. The agreement affords the company flexibility on work rules by expanding functions that could be handled across job classifications. It also eliminates one week of workers' vacation.
In return, all current union health, welfare, and pension benefits will be maintained. Workers would get a 1-percent bonus if ABF's operating ratio—the ratio of expenses to revenues—falls to between 95.1 and 96. They would get a 2-percent bonus if the ratio falls between 93.1 and 95 and a 3-percent bonus if it drops below 93. ABF's second-quarter ratio was 98.8, meaning it spent 98.8 cents for each $1 in revenue. The company will announce its third-quarter results on Nov. 11.
Fort Smith, Ark.-based ABF estimated that it would realize $55 million to $65 million of annualized net savings over the contract's life. Arkansas Best Corp., ABF's parent, has been trying for years to reduce the unit's labor costs, by far the highest in the LTL industry. In the second quarter, salaries, wages, and benefits accounted for 61 percent of the unit's operating expenses. Through the first half of the year, those charges accounted for nearly 64 percent.
In a statement, the Teamsters said it did not arrive at its decision lightly. "We have now arrived at a point where, simply put, there is nothing left to negotiate with this employer and no desire for a strike in the Central Region based on the vote we received yesterday from the affected membership," said Gordon Sweeton, chairman of the ABF national negotiating committee. "The responsible course of action is to finalize the agreement."
In a separate statement, the company expressed relief that the saga had ended. "This new labor agreement follows several years of sacrifice from our nonunion employees," said Judy R. McReynolds, Arkansas Best's chairman and CEO. "As the transportation and logistics market continues to rapidly evolve, we are grateful that our union employees have also recognized the need for ABF Freight to operate much more efficiently so that we can better serve our customers every day."
The current five-year contract expired on March 31, and both sides agreed to seven one-month extensions since then in order to hammer out a new compact. This is the first compact ABF has negotiated on its own and apart from the National Master Freight Agreement (NMFA), which has traditionally governed labor relations in the trucking industry.
The new master contract was narrowly ratified on June 27. However, the Teamster constitution requires that all regional or local supplements and riders be approved before the master agreement can be enforced. As of mid-October, all but two of the 27 supplements, which covered various crafts or regions, had been ratified. On Oct. 14, a group of 50 West Coast office workers ratified the 26th supplement. That left only the cartage workers in what is known in Teamster lingo as the "central region."
In late August, the cartage workers rejected management's proposal for a second time, triggering a third vote, this time for strike authorization. Top Teamster officials warned before the vote that a walkout by the cartage workers would cause a ripple effect that could paralyze the company. Management, for its part, said it had made its best and final offer to the group and was making strike preparations in the event of a thumbs-down.
As it happened, 77 percent of eligible voters who cast ballots rejected the strike authorization by a vote of 70 percent to 30 percent. Neither ABF nor the Teamsters would comment on specific issues regarding the supplement.
Shortly after negotiations began last December, ABF said it would need to make "extensive changes" to its network, including possibly shutting terminals and distribution centers, if it couldn't dramatically lower its labor costs and increase its flexibility through a new contract. The public warning didn't sit well with Teamster leaders, who were already upset with ABF for suing the union and rival YRC Worldwide Inc. over three concessionary agreements in 2009 and 2010 between YRC and the Teamsters. Those concessions that designed to rescue YRC, but ABF, which never received similar relief, said they were illegally negotiated outside the NMFA.
In late August, a federal appeals court affirmed a district court decision dismissing the lawsuit. In an e-mail today, a company spokeswoman wrote that the appellate court's decision "was not in our favor, and we decided not to seek further review." She declined to elaborate. The company has previously characterized the suit and the contract talks as "separate events."
In May, it was disclosed that McReynolds had met with YRC CEO James L. Welch to discuss the possibility of YRC acquiring most if not all of Arkansas Best. The talks were purportedly held without the knowledge of top Teamster leaders, including General President James P. Hoffa. Arkansas Best subsequently broke off talks, and no further discussions have been held.