Uncertainty in the LTL Industry

Uncertainty in the LTL Industry

by Cliff Lynch
7. February 2014 09:15

Last month marked the fiftieth anniversary of the Teamsters' National Master Freight Agreement (NMFA) with the motor carrier industry. Often referred to as Jimmy Hoffa's greatest achievement, it covered 400,000 union members and 16,000 motor carriers. The NMFA has diminished in significance until now it applies to only a handful of carriers. While this is not necessarily a bad thing for the carriers and shipping public, it has produced some disconnect in the industry. With different agreements with individual carriers, it is difficult to predict how negotiations might go.

In October of last year, ABF Freight System and the Teamsters ratified a five year agreement that reduced wages by 7% and cut other benefits.

In January of this year, UPS Freight and the union agreed on a five year contract that will raise wages by $2.50 per hour over the life of the contract, as well as increase other benefits. By the end of the contract the base pay for a UPS Freight driver will be an impressive $70,000 annually, the highest in the industry.

Three weeks ago, Teamster members overwhelmingly rejected a proposed five year extension of the current YRC contract. The proposal would have extended to 2019, the 15% wage reduction agreed to in 2009, along with a 75% reduction in pension contributions. 61% of the members drew a line in the sand. However, last weekend, the union accepted a modified proposal which although still containing the extension of the 15% rollback, made some other concessions to the employees. Without this agreement, YRC would have been in serious trouble with their $1.4 billion debt load, a $69 million chunk of which is due to lenders on February 14. They now have begun to move ahead with refinancing.

Since labor and fuel are the two major expenses of any motor carrier, these agreements have a direct impact on the rates shippers will pay. And even for non-union carriers it would not be surprising to see some pressure for higher wages, particularly in view of the UPS agreement.

Even though the YRC issue seems to be resolved at least for the time being, it is difficult to predict what these agreements mean to the shipping public. Most industry experts are predicting increases in both TL and LTL of 2-3% this year; but as always, there will be some uncertainty surrounding fuel costs, capacity, and drivers.

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