The International Brotherhood of Teamsters formally endorsed a contract agreement with YRC Worldwide (YRCW), the union announced last night. The endorsement means that the national organization is recommending approval of the contract by the local freight unions.
“The worst economic recession since the Great Depression continues to batter the trucking industry and threatens our YRCW members’ jobs,” said Tyson Johnson, Teamsters Freight Division director and co-chairman of the Teamsters National Freight Industry Negotiating Committee (TNFINC). “While we recognize that this plan contains economic and work-rule concessions that are difficult to accept, members need to fully understand that if this NMFA (National Master Freight Agreement) modification is rejected there is no doubt this company will go out of business. This plan is far from perfect, but it will allow more than 25,000 Teamster families to continue to earn a paycheck, maintain healthcare coverage and preserve their pension benefits.”
YRCW’s (NASDAQ: YRCW) board of directors has also approved the tentative agreement. The company said ratification is expected by late October.
The deal extends the current NMFA and supplemental agreements for two years until March 31, 2015. Under terms released by the Teamsters, a 15% wage reduction will continue until that time. Hourly rate and mileage increases will be instituted of 40 cents on April 1, 2011; 45 cents on April 1, 2012; and 40 cents each on April 1, 2013 and April 1, 2014. Those increases would be less the 15% reduction, the Teamsters said.
YRCW will resume pension contributions on June 1, 2011, at 25% of the contribution rate that was in effect on July 1, 2009. There will also be an increase to health and welfare funds of 35 cents per hour each year until March 2015. Union members with more than four weeks of vacation time will lose one week of time.
The union will receive an additional seat on the company’s board. Under the deal, management and non-union employees will share equally in cost sharing and there are “snap-back” provisions that will restore wages to the full NMFA rate if the plan is terminated, YRCW files bankruptcy, or the company is sold without TNFINC approval.
“We will have greater oversight with the addition of another board seat and we negotiated strong language giving us access to financial records and key stakeholder discussions as the process moves forward,” Johnson said. “The company will only be viable with a reduced level of debt and new investors. The sacrifices of YRCW Teamsters set the stage for the company’s lenders to do their part and make this company and attractive investment for new investors.
“If our members ratify these concessions, they will only remain in place if there is significant level of debt reduction and new investment in the company,” Johnson added. “We will have access to these discussions when decisions are made. If our interests are not protected, we can pull our concessions back. This will keep everyone’s feet to the fire.”
YRCW also announced a reverse stock split, and that chairman, president & CEO William D. Zollars will retire at the successful completion of the company’s recovery plan.
The stock split, which will be executed at a ratio of 1:25 on Oct. 1, will reduce the number of authorized common shares from 2 billion to 80 million and the number of outstanding common shares to approximately 48 million from approximately 1.2 billion.
The split is necessary because the company’s stock, which was trading at 26 cents in early morning market activity, faces delisting for not meeting minimum NASDAQ requirements, according to Bloomberg. The split will raise the price above the threshold.