Deregulation & The Teamsters
Before deregulation, the Teamsters Union was as much as part of the trucking industry as tires and fuel - they all cost a lot, but it was impossible to run a trucking company without them.
Since the 1960s and the days of legendary union president Jimmy Hoffa, the organization enjoyed a nationwide contract with less-than-truckload carriers, who dominated the trucking industry. All that changed with deregulation in 1980. Union influence in trucking and the less-than-truckload sector has plunged.
"The primary reason the trucking industry was deregulated was there was a general feeling the rates were too high," says Fred Stephenson, retired associate professor of distribution at the University of Georgia's Terry College of Business. "But the underlying theme of that was also a general consensus that the Teamsters Union was just too powerful."
The union was able to exert incredible power to get sizable increases in its contracts because of its large employment numbers in trucking, Stephenson says. This was one of the main reasons trucking rates - which for all practical purposes were collectively set by carriers before deregulation - were so high.
"When you think about who really got hit from deregulation, the first group was the Teamsters Union," he says.
The Teamsters did not have a lot of clout to fight deregulation in Washington because they were under investigation for questionable investments in mob-run Las Vegas casinos. Teamsters President Roy Williams would eventually go to prison in 1983 for using pension fund assets to attempt to bribe Sen. Howard Cannon (D-Nev.), chairman of the Senate Commerce Committee and a champion for opponents of deregulation. Cannon himself was under investigation for his financial dealings with the Teamsters in Nevada and eventually was marginalized in the debate.
Stephenson says the next group to take a hit was any carrier operating using the Teamsters. Union carriers had high labor costs compared to the fast-rising and generally non-union truckload carriers.
"After deregulation, it became very obvious that the unionized carriers, whether truckload or less than truckload, couldn't compete against non-unionized carriers," says Glenn Brown, president and chairman of Contract Freighters Inc., which grew from a small regional carrier before deregulation into a major international truckload carrier today.
"There were a lot of costs involved in being union," says John Smith, president and CEO of CRST, another company that prospered after deregulation. "You could not survive deregulation in the truckload business and be union. The way the Teamster contracts were structured, there were just too much cost."
The companies that did survive had to find new ways to operate.
"If you go back and look at the 50 largest carriers in 1975, there are just four of us left," says Robert Young III, chairman and CEO of Arkansas Best Corp., parent to ABF Freight System, one of the few large LTLs to survive deregulation. "You had a number of LTL carriers going out of business damned near every month."
To help survive deregulation, Young's company put together a team two years before deregulation because they had a strong sense it was coming. The team's recommendation was to either become a dominant regional LTL operation or a large nationwide LTL. They chose the latter, and today the company operates 5,000 tractors and 18,000 trailers.
Another survivor is Schneider. As Schneider Transport, it was a union organization. In 1985, Schneider National Carriers was formed by joining all of the separate business units of the company. SNC is now the major part of the organization's operations, while Schneider Transport remains a union carrier but is extremely small in size.
"At the time of deregulation, it was very clear that a truckload union carrier was not going to be able to compete in the marketplace, so we began Schneider National Carriers, which was a union-free organization," says Bill Matheson, vice president and general manager of Schneider National's Truckload Services.
The move allowed the company to "establish a cost base to where we could continue to operate the union company and allow those people with a lot of tenure with the organization to stay with the company until retirement," Matheson says.
Today, the company employs about 15,000 company drivers and independent contractors on the Schneider National side, and only about 40 on the Schneider Transport side.
The decline in LTL operations and the rise of non-union truckload firms resulted in fewer union-affiliated truck drivers. Their numbers have fallen from a high of more than 300,000 to about 100,000 today, while the number of truck drivers on the road has increased dramatically, according to the Teamsters Union.
"It's clear the union was essentially caught flat-footed in the early 1980s. The union was different at the time, with different players," says Bret Caldwell, spokesman for the Teamsters Union.
There were other blows to come for the union.
Three months after deregulation, Congress passed the Employee Retirement Income Security Act. The measure required businesses to pay unfunded pension liabilities before their assets could be liquidated, leaving little or no money for company principals. That forced some carriers to ask drivers for wage cuts, that, even when agreed to, rarely managed to sustain faltering carriers.
"It really hurt the union carriers. They really got hit by a one-two," with deregulation followed by ERISA, says Lana Batts, former president of the Truckload Carriers Assn. "The non-union truckload guys were able to offer cheaper rates after deregulation."
As the union carriers went out of business in large numbers, the Teamsters continued to lose influence.
The passage of the Surface Transportation Efficiency Act of 1982 only made matters worse for LTLs and union drivers, but was a boon to truckload operations. The legislation allowed for longer trailers and different combinations.
Caldwell admits the union failed to organize the new truckload carriers that were popping up. There were other challenges as well. First, there were more and more independent truckers after deregulation, who cannot be organized under federal labor law. Second, deregulation occurred during a difficult time for the union, when several organization presidents were indicted, including Frank Fitzsimmons, Jackie Presser and Roy Williams, on charges ranging from bribery to misappropriation of union pension funds.
"The union was in quite a bit of turmoil at that point and did not react to essentially what was a crisis situation with any kind of crisis response," Caldwell says.
Capping off the Teamsters troubles throughout the infancy of deregulation was a lawsuit in 1989 filed by the U.S. Department of Justice under the Racketeer Influenced and Corrupt Organizations Act.
Many believe that move by the government finally busted the union's power when it came to trucking. Rather than waging a long court fight, the Teamsters signed a consent decree, which included having a court-appointed board oversee the union and direct election of a president by all of the union members.
It's also difficult to organize drivers who are seldom home long enough to attend meetings.
Today the Teamsters Union represents truck drivers and other workers at six major less-than-truckload carriers, as well as workers at 50 to 60 other smaller carriers. Overall the union's numbers are much smaller - about 1.4 million members - down from a one-time high of more than 3 million.
Despite reforms, Ron Carey, the Teamsters' first president elected by the rank and file, was ousted amid charges of corruption. Today, James P. Hoffa, son of former Teamsters president Jimmy Hoffa, is at the reins, and Caldwell says a battle still remains.
"Our commitment to growing is in the freight industry, and we are looking ahead to the next 10 years and those numbers will grow."
— Evan Lockridge
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