Workers at YRC Worldwide Inc. and its subsidiaries – Yellow, Roadway and Holland – represented by the International Brotherhood of Teamsters gave the thumbs up to a new labor contract that calls for a reduction in gross wages of 15% from the full National Master Freight Agreement rates that kicked in Aug. 1 – a further 5% cut in pay on top of the 10% wage reduction previously ratified by Teamster membership in January.
Additionally, the plan will allow YRC to terminate pension fund contributions effective from July 1, 2009 through December 31, 2010 – meaning Teamster employees will not earn additional pension accruals or credits. At the same time, though, they will not lose accrued benefits or credits previously earned during this period.
The plan also provides for the issuance of options for YRC stock to Teamster members that would lead to employee ownership of an additional 20% of the company's outstanding stock over and above the 15% that was negotiated at the end of last year. The modifications were ratified by Teamster members by a 58.5% to 41.5% margin, with 64% of members casting ballots, the Teamsters said.
"With the support of our employee-owners and other stakeholders, we continue making progress with our comprehensive recovery plan – realizing efficiencies from the YRC integration, restoring financial strength and positioning YRC Worldwide for future success," noted Bill Zollars, chairman, president & CEO of YRC Worldwide. "The contract changes enable us to reduce our cost structure, preserve capital and be more competitive in the marketplace."
Related savings from the pension and wage reduction are approximately $45 million per month, he said, and begin immediately – with savings increasing to an estimated $50 million per month in 2010. Over the 44 month term of the labor contract, that should add up to $1.2 billion of cost savings for YRC.
The deal is still not quite a slam dunk, as James P. Hoffa, the Teamsters’ general president, noted there are two critical provisions: 1) YRC and its bank group amend their loan agreements in order to provide the company with sufficient liquidity and flexibility to complete its restructuring; and 2) affiliated Teamster Pension Funds approve the "deferral/termination" arrangement.
"Now YRC, banks and other stakeholders have to step up and do their part to ensure the company's long-term survival," Hoffa said. "Do the banks want the fate of 35,000 YRC workers, hundreds of thousands of retirees, and hundreds of thousands of other workers to be their responsibility if they do not significantly rework YRC’s loan facilities?"