LTL carriers step up cost saving as market stays stubbornly soft
As job culls spill over into the less-than-truckload (LTL) sector, XPO has been on a ...
A dispute with the Teamsters union in the US is hobbling the restructuring of less-than-truckload (LTL) carrier Yellow.
The union is seeking to block major elements of the company’s consolidation efforts and, in a further escalation, has demanded Yellow stop using other carriers to move some of its freight.
The LTL carrier has lagged its rivals, struggling to make profits as others were posting record results. It tabled a net deficit of $15.5m for the fourth quarter of 2022 and faces nearly $1.6bn in debt payments and obligations over the next three years.
Management, which expressed bullishness on the LTL market at its earnings call, embarked on a major restructuring last year to consolidate its various brands and regional operations. It has completed this in the western US and was planning to move on to the eastern part, which accounts for the larger portion of its business.
Part of this is the divestiture of 28 smaller terminals to streamline operations and generate cash to pay off debt. But the Teamsters has voiced opposition and said the proposed network overhaul would “subvert union bargaining” and would usher in unfavourable changes to work rules.
The union cancelled a meeting scheduled for 5-7 April to discuss the changes and wrote to the firm declaring that “the use of purchased transportation is no longer permitted by any of the Yellow operating companies covered by the Yellow National Master Freight Agreement”.
Purchased transportation accounted for 14.3% of Yellow’s revenue last year.
Satish Jindel, president of SJ Consulting, questioned if the union’s demand extended to intermodal traffic, which typically makes up a considerable part of third-party carriage, saying: “If this is the optimal way to move cargo from LA to Chicago, then you have to do it.”
He said the union’s tactics were “counterproductive” at a time when shippers had alternatives to turn to, as the capacity crunch in the LTL market has eased in recent months. Over time, the unionised share of LTL operations in the US had fallen to 19.6% in terms of revenues, he pointed out. In 2008, it stood at 35%.
Unionised players like New England Motor Freight, Consolidated Freightways and Lakeville Motor Express have dropped out of the market.
However, he does not expect that the impasse with the union could push Yellow over the brink, noting that its results have improved since it started the revamp. He said: “It will not go under, but it risks losing business. Now is time for all to work together.”
It is doubtful that the Teamsters leadership will share this assessment. According to observers, the union has become more militant under a new leadership elected on pledges of taking a tougher line than its predecessors, which does not augur well for contract talks with LTL carriers ABF Freight and TForce Freight, which recently got under way.
It is also an ominous sign for the looming contract talks with UPS. Shippers are nervous about a possible strike there, although UPS management has expressed confidence that a mutually beneficial agreement would be worked out.
One of the bones of contention will be a class of drivers at UPS required to perform additional tasks such as helping load and offload freight at terminals. This is also one of the lines of battle at Yellow.
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