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YRC Unit New Penn Seeks Operational Changes As Parent, Teamsters Negotiate Contract

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YRC Unit New Penn Seeks Operational Changes As Parent, Teamsters Negotiate Contract

New Penn Motor Express, the Northeast U.S. unit of less-than-truckload carrier YRC Worldwide, Inc. (NASDAQ: YRCW) notified the Teamsters union last week it plans to make four changes to its network operations, moves that come as YRC and the Teamsters continue talks to replace the current five-year collective-bargaining agreement that expires March 31.

The proposed "change of operations," which Lebanon, Pa.-based New Penn must file with the Teamsters before implementation, would allow the regional carrier to shut its terminal in Rochester, N.Y. and consolidate operations there at terminals in Buffalo and Syracuse.

A second change would allow New Penn to close its terminal in Milton, Pennsylvania, about 50 miles north of Harrisburg, and spread those operations across facilities in Reading, Scranton, Altoona, and Camp Hill, Pennsylvania.

A third change would eliminate trucker Central Freight Lines as New Penn's interline carrier for freight moving to and from Florida and Texas, and replace Central with YRC Freight, YRC's long-haul LTL unit.

The fourth change would add Trenton, N.J. as a second consolidation terminal for freight originating in the New Penn service area and headed west through an interline arrangement with Reddaway, New Penn's West Coast sister company. The addition of Trenton would take the pressure off its lone consolidation point in Camp Hill, New Penn said. New Penn drivers would transport the westbound freight from Trenton to the Reddaway interline point, according to the company.

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Under the National Master Freight Agreement between labor and management, a company has the right to implement a change of operations. Management must meet with the union to discuss the proposal, and labor has substantial input into how the changes are executed. However, the Teamsters have little power to block its implementation.

Teamster and New Penn officials met on January 31 in Scottsdale, Ariz. to discuss the proposed changes. The company said it would like the changes to take effect during the first week of April, which would follow right on the heels of the contract's expiration date. Under the first two changes, which would involve the shuttering of New Penn terminals, all employees on the current seniority lists would be able to apply for job transfers, New Penn said.

Change of operations requests are not unusual in the LTL industry, where carriers regularly explore ways to streamline often-complex networks in an effort to operate more efficiently without sacrificing reliability. According to a source close to YRC, one persistent problem over the years was that the company's three regional U.S. networks (the other being Holland, which serves the Midwest) would overlap YRC Freight's operations, thus effectively pitting the regionals against the national operation for the same freight.

YRC didn't respond to requests for comment on the timing of its proposal. YRC, based in Overland Park, Kan., met with Teamster officials earlier this month for another round of contract bargaining. According to the Teamsters, the two sides have moved on to more contentious issues after resolving most of the easy ones.

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Most of the "national language" issues have been resolved, said Ernie Soehl, the union's national freight director, without disclosing specifics. "A lot of work still remains to be done, however, including the difficult issues of economics and operations," Soehl said. Noting that the industry-wide shortage of qualified drivers remains a "central topic of discussion," Soehl said that "one obvious way to help with driver recruitment and retention is to raise wage rates."

The dive into the bread-and-butter issues is likely to be difficult, given the baggage that exists. To save YRC from potential ruin in 2009, the union's rank and file agreed to a debt-for-equity swap that diluted their collective equity holdings to near zero. The workers also agreed at the time to a massive chop in pension benefits that has never been restored. In 2014, needing to restructure $1.4 billion in debt and not getting any further latitude from its lenders without additional labor concessions, management sought a five-year contract extension that included further givebacks. The rank-and-file rejected YRC's initial offer, prompting management to warn that bankruptcy protection was the only viable option if the union didn't bend.

Members subsequently voted to ratify the extension. However, they made it clear that they would seek pay raises and pensions snapbacks when the extension expired in March 2019.

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