Teamsters Union advises YRC will 'be out of money by August'Teamsters not 'bailing out' Yellow again
The teamsters union says YRC has been poorly managed for years, and they will no longer bail out YRC again. The union said that YRC contacted them advising they will be out of money by August.
“ Yellow has been unable to effectively manage itself for a long time,” said Sean O’Brien, Teamsters general president, in a video to members. “Now, the company says it’ll be out of money by August. Do not forget — Teamsters have already given back everything they possibly could to keep Yellow afloat. ”
The Teamsters General President said that the union gave billions to the company in wages, benefits and concessions already. O'Brien referenced the $700 million government bailout already provided from COVID-relief. The money was supposed to go towards reinvesting in new equipment, and catching up on delinquent health & pension payments. It is not left for the Teamsters to save this company; we have given enough, O’Brien said. “ What happens next is out of our control. ”
The key sticking point has been the driver requirement that they must work freight on the docks and potentially at locations other than home terminals. The Teamsters union are contending that the letter of agreement violates the current contract as it expands utility positions.
A letter from John Murphy, Teamsters Freight Division Director, sent out on Monday advised that the change of operations in the West was different from the current proposal as the utility role in that region was contractually permitted and “all affected road drivers had their earnings protected and were allowed to continue to perform traditional road work.” John Murphy advised that Yellow is seeking to "assign employees to any job, anywhere, at any time across operating companies."
Yellow's memo on Thursday advised that 1,000 drivers (20% of total drivers) would have to work the docks, and they already have 400 compliant with these functions. They would fill the remaining 600 roles based on the least seniority.
“Let’s be clear: If you were at a non-union company — a very realistic possibility for MOST of you if Yellow does not survive — ALL of you would be subject to potential dock work regardless of your time in the industry,” the internal YRC memo read.
Yellow is willing to implement another pay hike ($0.60/hour and $0.015/mile) to get a deal completed. The problem with this proposal is Yellow does not have the financing to fund the increase and would need a loan, and is seeking to refinance its $1.5 billion of debt to a future date, while interest rates are at substantially higher.
John Murphy advised that the small promise of a modest increase that may not happen "is insulting". Murphy said, "Yellow wants to establish a one-way street that allows it to get everything it wants up front and early. The company wants our members to wait to see what happens down the road, even if it means workers are once again left holding the bag.”
Within the Teamsters General President video, O'Brien said, "Sometimes a bad job isn’t worth it anymore".
The parties agreed to pull forward negotiations of collective bargaining which expires March 31, 2024 and find a suitable operational change. Yellow is in a rush to begin negotiations, however the union has been consistent in its stance that it will follow normal negotiating protocol and will not begin discussions till August.
The Teamster Union are also negotiating with TForce (NYSE:TFII) and UPS (NYSE:UPS). It recently reached a conclusion with ABF Freight's (NASDAQ:ARCB) LTL unit ABF Freight.
Deteriorating Logistics Market, Untenable Financial Conditions
At the end of the first quarter, Yellow reported sales of $5.14 billion, and $168 million in liquidity. Y/Y they repaid $98 million in debt. The company is not generating any profit.
he company continues to book net losses with a net margin of -0.10%, and is operating near breakeven. Currently the company is spending more than they are generating. Tonnage declined 16% y/y, and is down 1/3rd over the past two years.
Yellow excused the tonnage decline as part of their multiyear overhaul of "One Yellow" to consolidate its LTL brands and reduce cost by closing terminals. The drop in tonnage has been steep enough to indicate customers are routing freight through alternative carrier options.
The “company is running out of cash and is at risk of closure/liquidation,” the Yellow memo read. “Delays to Phase 2 and the One Yellow transformation has come with a serious cost. The company is unable to pay its bills and secure lender financing without showing to the market that we are able to implement on our One Yellow plans.”
Yellow currently provides 22,000 union jobs, and is pushing for full support to keep the survival of their brands intact. Yellow is attempting to push the Union to negotiate immediately, however O'Brien said the union will keep its current deal while it can.
“Yellow has shown that it doesn’t deserve and cannot be expected to continue under its current structure,” O’Brien said. “The Teamsters cannot and will not keep bailing out this company with concessions.”
