Union greed almost killed the auto industry. It did kill our steel industry. Now it is about to be killed in Hollywood. But for 22,000 truckers, they are about to be told to fill taco shells, the unions killed off a freight company.
“Last month, Teamsters claimed Yellow (NASDAQ: YELL), one of the largest trucking companies in the United States, told the union that Yellow would be out of cash by August. To avoid demise, Yellow’s executive team said Teamsters, which represents some 22,000 Yellow employees, must permit operational changes the union previously approved.
Teamsters General President Sean O’Brien’s response? Go ahead and shut down.
“It is not left for the Teamsters to save this company; we have given enough,” O’Brien said in a June 12 video statement. “What happens next is out of our control.”
Thanks to the unions, 29,000 parents have applied for vouchers in Iowa for schools for their children. Parents are fleeing unions. Just as parents understand unions harm education, workers to know that the unions are killing their jobs—and do not care. Maybe if the Yellow Freight truckers told the union to take a hike, they could save their jobs—nothing else will.
Why Teamsters is willing to sacrifice 22,000 union trucking jobs
Rachel Premack, Freight Waves, 7/6/23 https://finance.yahoo.com/news/why-teamsters-willing-sacrifice-22-110000492.html
Last month, Teamsters claimed Yellow (NASDAQ: YELL), one of the largest trucking companies in the United States, told the union that Yellow would be out of cash by August. To avoid demise, Yellow’s executive team said Teamsters, which represents some 22,000 Yellow employees, must permit operational changes the union previously approved.
Teamsters General President Sean O’Brien’s response? Go ahead and shut down.
“It is not left for the Teamsters to save this company; we have given enough,” O’Brien said in a June 12 video statement. “What happens next is out of our control.”
Twelve days later, O’Brien tweeted a picture of a gravestone: Yellow, 1924 to 2023.
It’s not unusual for union leaders to call the bluff of companies that claim they can’t afford certain benefits. But O’Brien’s proclamation is shocking to some trucking insiders. Yellow really could go bankrupt, eliminating tens of thousands of unionized trucking jobs. (Heavy Duty Trucking called Yellow Corp. the “cat with nine lives” in 2010, after it narrowly avoided shutting down. It’s nearly gone bankrupt three times since then.)
It’s not as if another union trucking firm is going to pop up anytime to scoop up those 22,000 workers, either. The share of union jobs in less-than-truckload, the freight sector in which Yellow is the third largest, has steeply declined over the past few decades.
On the surface, it’s mysterious why O’Brien would settle for the company shuttering instead of seeking to retain 22,000 Teamsters jobs. Unionized trucking jobs are so rare that one might think a so-so union job is better than no union job at all.
However, labor experts say that this move isn’t surprising. Rather, it’s a sign that union leaders like O’Brien and Shawn Fain, president of the United Auto Workers, have sharply changed from those of the past few decades. Rhetoric is now proudly militant, and jobs that aren’t up to Teamsters’ standards won’t be tolerated.
“There’s a generational shift that’s going on in labor,” said labor and employment lawyer Benjamin Dictor, who counts among his clients Teamsters Local 804, which represents UPS workers and others in the New York City area.
Dictor said trucking fleets can accept fuel prices as a fixed cost. Now, he said, labor costs should also be viewed as non-negotiable.
“These companies for generations have treated labor as the cost that they can extract their profit from when other costs are more rigid and higher,” Dictor said. “When those costs go up, they look to labor to come down, so that way they can satisfy their investors. One of the things that you’re hearing from Sean O’Brien is that that’s not the case. Some aspects of labor are a fixed cost. If you can’t afford gasoline, you better get the f— out of the trucking business. I think you hear Sean O’Brien saying that if you can’t afford the labor costs, you better get the f— out of the trucking business.”
Yellow isn’t the only freight company in a showdown with the Teamsters this summer. The union and UPS have been locked in months of negotiations for the next five-year contract. The current one expires on July 31, and UPS employees have voted to authorize a strike if no new contract is reached.
A key difference between Yellow and UPS is each company’s financial reality. Teamsters is better able to command a lucrative contract for its approximately 340,000 UPS employees because the parcel giant has a lot more cash. In 2021 and 2022, UPS generated some $24.3 billion in net income. Yellow lost around $87.3 million over that same period.
Labor expert Michael Duff, a law professor at Saint Louis University, said it’s unlikely that O’Brien would have this “que sera, sera” attitude if that wasn’t the will of the bargaining unit.
“There is a large sense among rank-and-file unionists that they’re simply not going to take it anymore,” Duff said, speaking generally about unionized labor. “Part of what’s going on here is you’ve got people like O’Brien, who are not willing to cooperate in the old way given the urgency of the moment.”
Why Yellow is struggling
Observers have blamed Yellow’s struggles on two major factors: its unionized workforce, which is inherently less flexible than non-union labor, and its failure to properly manage its acquisitions.
According to J. Bruce Chan, a transportation analyst at the investment bank Stifel, union labor comes at around a 30% cost disadvantage compared to nonunion workforces. Unionized LTL carriers have dropped from claiming 42% market share in 2002 to 22% in 2022, according to numbers from SJ Consulting Group, which advises transportation and logistics firms. Only three unionized LTL carriers remain today: Yellow; ABF Freight; and TForce Freight.
However, Chan said Yellow’s issues aren’t because of Teamsters. Satish Jindel, the founder of SJ Consulting Group, agreed. “You can’t lay the risk of Yellow going out of business at the feet of Teamsters,” Jindel said.
Both Jindel and Chan highlighted ABF, the LTL fleet at ArcBest (NASDAQ: ARCB), as one example of a successful union operation in the same sector as Yellow. ABF’s revenue per shipment, including fuel surcharge, equaled around $529 in the first quarter of 2023 – around 56.2% higher than Yellow’s that same period. What’s more, on May 30, ABF announced that its Teamsters employees had ratified a five-year collective bargaining agreement.
Yellow has said that Teamsters must allow the network changes or it will go bankrupt. Yellow’s network is currently a mishmash of several trucking fleets it acquired in the early 2000s. Those networks were never fully integrated.
A 2019 labor contract enabled Yellow to consolidate those networks. Yellow integrated networks in the western U.S. last year. Now, the Teamsters union is blocking further consolidation. Yellow filed a $137 million lawsuit against the Teamsters on June 27 for blocking the company’s plans to consolidate terminals and change work rules for nearly 1,000 truck drivers.
“Yellow is simply asking the IBT to come to the table to negotiate a modernization plan that also includes wage increases for Yellow’s employees,” a Yellow spokesperson said in a statement to FreightWaves. “The company is open to negotiating any time and any place.”
“Yellow Corp.’s claims of breach of contract by the Teamsters are unfounded and without merit,” O’Brien said in a June 27 press release in response to the lawsuit. “After decades of gross mismanagement, Yellow blew through a $700 million bailout from the federal government, and now it wants workers to foot the bill. For a company that loves to cry poor, Yellow’s executives seem to have no problem paying a team of high-priced lawyers to wage a public relations battle — all in a failed attempt to mask their incompetence.”
The Teamsters did not provide a comment to FreightWaves for this article beyond the June 12 video, June 12 fact sheet, and June 27 press release.
A Yellow bankruptcy is not definite, but more likely without union support
Yellow has faced potential ruin several times over the past 15 years. The most drastic was in 2009, when the company managed to convert nearly $500 million in debt into company equity. The Securities and Exchange Commission approved the debt-for-equity swap, and the Teamsters also helped push lenders to convert their debt.
During the Great Recession, the Teamsters granted Yellow a 15% wage cut and agreed to forgo pension contributions for five years. Those wage concessions were extended in the 2014 contract as a way to keep Yellow in business.
Teamsters-represented employees at Yellow won an 18% wage increase in their 2019 contract, which remains in place today.
Support of both Teamsters and the federal government was also key for the $700 million U.S. Treasury loan to the company in 2020. Today, Yellow no longer seems to enjoy that union and government support, which makes the firm more exposed to a bankruptcy.
Teamsters said in a fact sheet that Yellow is “reaping the benefits of billions of dollars in wage, pension, and work rule concessions” dating back to 2010. A Yellow spokesperson previously told FreightWaves that Yellow employees would receive a $1.77 hourly wage increase if Teamsters approved the network changes.
Neither Jindel nor Chan believes that the federal government is going to step in to bail out Yellow, nor has the trucking company asked. Yellow wrote a letter to the White House on June 30 asking President Joe Biden to get Teamsters to the negotiating table.
“O’Brien does have a point — the Yellow Teamsters have progressively and consistently given up a lot,” Chan said. “At a certain point, it does have to stop. But is a full blown shut down the answer? It’s probably not one that ultimately works out in the best interest of membership.”
It’s a question that many in the trucking industry are asking: Is an imperfect union job is better than no union job? Dictor recommended rethinking the query.
“It’s like if I told you that the only way that Yellow could stay in business is that they didn’t have brake pads,” Dictor said. “If they couldn’t have those things, should we give up all these trucking jobs simply because they couldn’t operate safely? We would say no, obviously, we need trucks on the road that are operating safely. It’s for our sake, it’s for everybody else’s sake; there are certain costs.
“If that’s what the brake pads cost, that’s what the brake pads cost,” he added. “And if you can’t afford the brake pad, you know, get the f— out of the industry. The same thing is true about labor. We have to stop thinking about labor like it’s something that there can be a compromise on. … If you can’t afford the labor at a cost that allows these human beings behind the wheel of these trucks to live lives where they get to appreciate their families and their life outside of work and be human beings, then get the f— out of the trucking business.”
