The forbearance of YRC Worldwide Inc.'s unionized workforce is about to be tested again.

Tomorrow in Dallas, YRC executives will brief leaders of the Teamsters Union representing about 25,000 YRC employees. The meeting will cover the Overland Park, Kan.-based company's recent performance, its future prospects, and the need to prepare for the first of a round of debt obligations set to come due in 2014, the company said in a brief statement last week.

James L. Welch, the less-than-truckload (LTL) carrier's CEO, essentially outlined the meeting's agenda in a letter sent to employees Oct. 30. Servicing YRC's $1.4 billion debt load leaves the company with no money to reinvest in the business once wages, benefits, and regular operating expenses are paid, Welch said in the letter. YRC's lenders have told the company they will not agree to refinance its debt without, among other things, a new labor agreement that extends beyond the current compact's March 2015 expiration date. YRC's operational performance also needs to improve for its lenders to consent to a debt restructuring, Welch said.

DEJA VU
In a true déjà vu moment, Welch said that any refinancing initiative "will require the help of our employees."

This would hardly be the first time YRC has gone to the workers' well. Both sides agreed to three extraordinary concessions during 2009 and 2010. The last round, in September 2010, extended the then-current contract for two years beyond March 2013, cut workers wages by 15 percent (after annual hourly increases in the 40- to 45-cent range), and allowed the company to resume in mid-2011 previously frozen pension contributions but at only one-fourth the level in effect before the freeze. The agreements sparked a lawsuit from unionized rival ABF Freight System Inc., which argued that they violated the National Master Freight Agreement, the pact that has traditionally governed labor relations in the trucking industry, by not being extended to all member companies.

Welch's latest call for sacrifice is unlikely to sit well with Teamster leadership. General President James P. Hoffa, who will not attend tomorrow's meeting, would "rather get his wisdom teeth taken out" than agree to further concessions, said a source familiar with the situation.

As YRC was spiraling downward towards bankruptcy in 2009, Hoffa worked both publicly and behind the scenes to keep the company afloat. He urged the rank-and-file to accept painful concessions and personally lobbied for a controversial debt-for-equity swap in late December that effectively saved YRC but resulted in existing common stock holders being virtually wiped out.

Most of YRC's problems can be laid at the feet of YRC Freight, the company's long-haul unit. The result of a disastrous integration of Yellow Freight System and Roadway Express following Yellow's 2003 purchase of Roadway, YRC Freight had been bleeding red ink for years, offsetting the otherwise stellar performance of the company's three U.S. regional subsidiaries.

Jeffrey A. Rogers, appointed by Welch in 2011 to run YRC Freight, seemed to be making progress on a variety of metrics. Then after a subpar second quarter attributed to the bumpiness of a big network integration, Welch fired Rogers in September and took personal control of the unit. Company sources said Welch had grown increasingly unhappy with the division's performance.

Since reaching an all-time high in 2005, YRC stock has lost nearly all its value. It has engineered two reverse stock splits in the past three years in the hope that the moves would boost the company's equity value by reducing the number of outstanding shares. YRC stock is up more than 23 percent so far this year but has been on a steep decline since it hit a yearly high in early July of above $35 a share. As of midmorning trading today, YRC shares changed hands at $8.51 a share.

ABF DEAL
Tomorrow's meeting, which had not been on the annual calendar, comes less than a week after the Teamsters ratified a five-year collective bargaining agreement with ABF. The compact, which calls for a 7-percent wage reduction that will be recouped over the contract's life, will yield between $55 million and $65 million in net savings for Fort Smith, Ark.-based ABF, which has the highest cost structure in the LTL industry. That will not only narrow the cost gap between the rivals, but it will likely give ABF the flexibility to pursue business, perhaps some of that being YRC's, that it had to pass on because its old cost structure wouldn't support it. The new contract took effect over the weekend.

Though not publicly mentioned as an agenda item by YRC, it seems doubtful the hours will pass without the impact of the A BF-Teamster contract being discussed. That will add another log to the pile of challenges facing Welch. As the source remarked, "there seems to be no end to [YRC's] problems."