Teamsters to Vote on YRC's New Labor Contract

Teamsters will vote on YRC Worldwide's proposed contract changes in the next few weeks, which include a 5 percent pay cut, an 18-month termination in pension contributions and a reduction in health and welfare contributions.

The union has to pass the changes through a simple majority. Ballots are expected to go out July 17 and be counted by August 6, according to a Stifel Nicolaus report. If the proposal goes through, the union will be given an appointee on YRC's board of directors as well as a corporate restructuring advisor at the company, the report said. Members will also receive stock options for 20 percent of the outstanding shares of YRC stock, pending shareholder approval.

According to YRC, the cutbacks, part of a company-wide plan to restore the less-than-truckload giant's financial health, would save the company about $45 million a month, growing to $50 million a month in 2010.

"Modifications to the labor agreement will help us reduce our cost structure, preserve operating capital and increase our competitiveness," said Bill Zollars, chairman, president and CEO of YRC.

"This is a tough situation for the company and our members," said Tyson Johnson, director of the Teamsters freight division. "Our members should know our freight leaders, pension fund trustees, Teamster staff and independent experts have worked tirelessly to evaluate the situation and develop a solution that protects our members and allows the company to survive the worst freight recession in several generations."

While the plan would allow YRC to stay afloat and allow employees to keep their jobs, the ratification may cause wages and stocks to decrease from other carriers who cannot compete, Stifel Nicolaus said.

According to Stifel Nicolaus, "if this plan is not ratified by its NMFA members by August 1, or if funds representing 90 percent of the employers' collective monthly contributions do not agree to the 18-month pension payment termination period, YRC may terminate this plan and any unvested stock options in section 11 shall be canceled and forfeited. This is likely to give them the Chapter 11 option near-term, in our opinion, if concessions are not granted."

In other efforts to secure its financial situation, YRC finalized an agreement with its lenders to extend the revolver reserve through July 31. The company will continue to work with its lenders on longer-term modifications to its credit facilities.