Labor Negotiations
The future of long-haul LTL trucking is at stake.
OLIVER B. PATTON
WASHINGTON EDITOR
Teamsters and unionized trucking companies are sitting down early at the bargaining table in hopes of hammering out a new labor contract well ahead of the March 31, 2003, deadline.
The negotiations, which determine wages and benefits for some 65,000 union drivers and dock workers, come at a critical time for the long-haul, less-than-truckload industry. It is a shrinking business, beset by declining tonnage and competition from non-union regional LTL carriers. The demise of Consolidated Freightways and A-P-A Transport earlier this year are just the most recent peals from a bell that has been tolling for decades.
Where there used to be dozens of unionized national LTL carriers, now there are three: ABF Freight System, Roadway Express and Yellow Transportation. Regional carrier USF Holland also is at the table.
Together these companies employ about 80% of the Teamsters covered by the national agreement. The others negotiate separately. Wages and benefits are negotiated at the national level, in Washington, while work rules are set by supplemental contracts that are negotiated regionally.
The immediate issues are familiar. Labor wants improvements in health care coverage, pensions and wages. Management wants more flexible work rules, more efficient health and pension systems, and the opportunity to develop new lines of business.
Neither side is expecting any surprises. In fact, the atmosphere at the start of the talks was cordial. "We understand what the companies are facing," said Phil Young, Teamsters national freight director and co-chair of the negotiating committee. "It is in everyone's interests that the companies succeed. We will be open to listening to the management."
For its part, management said it wants a "win-win" outcome. Sitting down almost six months early creates the opportunity "to arrive at a contract that is a win for the companies, a win for our employees and a win for our customers," said James Staley, president and COO of Roadway Express. Staley is chairman of TMI, the management negotiating committee that is an arm of the Motor Freight Carriers Assn.
This positive tone arises from ongoing discussions between labor and management leaders over the past three years, an activity that is formally sanctioned by a provision of the current National Master Freight Agreement. In addition, the companies have exerted a continuing effort to teach drivers about the business. "Employees are better educated today than ever before," said Timothy Lynch, president of the Motor Freight Carriers Assn., whose negotiating arm, TMI, represents management in these talks.
Of course, this being a negotiation, the opening statements also express resolve. "We will not accept an agreement that fails to address the needs of our members," said Teamsters General President James Hoffa. "We look forward to tough but fair bargaining."
Management's message is that the companies are in a tough spot. "With a steady decline in market share and new, non-traditional competition, we are at a critical junction in determining whether our segment of the industry will have an opportunity for survival and growth," said Staley.
An analyst put it more directly. "The companies' salaries, wages, benefits are too high to allow for adequate returns," said Daniel Moore, vice president and transportation analyst at Stephens Inc., Little Rock, Ark.
"In my opinion they have three to four years to reinvent their business," Moore said. "Otherwise, long-term, they may have bigger issues to address."
The most significant factor in the decline of the unionized LTL segment is the cost and flexibility of labor, Moore said. "It's not always poor management."
He would like to see an agreement that lets drivers perform a variety of tasks, so that companies can be more responsive to new business opportunities. "They need a more cooperative labor force if they want to continue to have jobs."
The CF bankruptcy, which put 15,000 drivers on the street, has to have been a "sobering" experience for the Teamsters, Moore said, adding that is one reason he believes the talks will produce an early settlement.
The other reason is that customers are watching. Shippers -- who were burned by the 1997 UPS strike, the CF closure and the troubles at West Coast ports -- are anxious for a smooth transition, according to Kathy Luhn, vice president of domestic policy at the National Industrial Transportation League.
"We applaud the early start," Luhn said.
The UPS strike was a watershed event. It cost the company $750 million and it taught shippers that they must always hedge their transportation bets. They learned that they must have relationships with a variety of carriers to have any hope of getting their freight picked up when there is a sudden drop in transportation capacity.
The lesson was underscored by the CF closure, Luhn said. Many shippers found that other carriers were reluctant to pick up freight from CF warehouses, worried they would not get paid or would face unforeseen liabilities. It came down to the carrier knowing and trusting the shipper. "The shippers that did not have those kinds of relationships (with carriers) were left to their own devices."
That is why shippers, as a matter of standard business practice, establish relationships with a variety of carriers -- union, non-union, regional, national," Luhn said. "It's good business to take care of good customers."
Just the act of sitting down early is a message intended for shippers. "We all understand that customers have more options available to them today than ever before," said Lynch. "It is our job to ensure that while we may have negotiating issues to resolve, we have an obligation to maintain the confidence and trust of the shipping public."
It is not clear yet what the negotiators will do about two critical issues: pensions, and the term of the next contract.
The Teamsters want to improve the pension package, but that will not be easy. The accounts that support retired Teamsters are underfunded. "Any rational person could look at the underfunding and realize that pensions need to come down, not go up," said analyst Moore. "If the current underfunding were assessed throughout this industry it would probably take some carriers down."
Typically the contract runs for three years, and that is the way the Teamsters want to keep it. Management is interested in a longer-term deal.
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