In a document leading up to the vote by members of the International Brotherhood of Teamsters union on a new contract viewed as vital to the survival of auto hauler Jack Cooper, the Teamsters spellsout in great detail just what happened to the company and its need to file for protection under Chapter 11 of the bankruptcy code.
The agreement with the Teamsters is one part of the reorganization plan and Teamsters leadership has urged its members to vote in the affirmative. The voting takes place September 6-9. The new contract holds wages and benefits in place.
In a Q&A document posted late last week for its members, the union’s leadership discusses in stark detail how Jack Cooper has come to the situation it finds itself in.
The Q&A says Jack Cooper has suffered a “significant” loss of business since 2017, “with much of that coming over the past 12 months.” The Big Three auto manufacturers have sought to diversify their carrier pool, and Jack Cooper has suffered from that goal, according to the document.
Jack Cooper bought Allied Systems in 2013 for $135 million, making it the largest auto carrier in the U.S. And since then, according to the Q&A, “Jack Cooper has struggled, undergoing a series of highly noticeable refinancings that have only moderately addressed its debt load. Those minor attempts to reduce its debt caught the attention of customers and gave them yet another excuse to move work away from Jack Cooper.”
In announcing its restructuring plans, Jack Cooper said a capital infusion by junior lender Solus Alternative Asset Management would allow it to purchase new trucks. And the age of its current fleet is an issue, according to the Teamsters.
“Those older trucks cannot haul the same capacity as a newly configured piece of equipment,” the document says. “The difference between a profitable load and a loser is often less than one car or truck being hauled.”
General Motors, according to the document, has been hiring non-union carriers at most of its “non-plant” locations, like railheads. “This also means that GM is giving no rate increases to car-haulers and often demands rate cuts just to keep the business,” according to the Q&A. “Jack Cooper rarely if ever is competitive on bidding on new work due to its cost structure.”
And in a startling admission for a union, the Q&A goes on to say that “all the old rules of ‘union built and union hauled’ have been thrown out the window and union car-haulers are suffering as a result.”
Jack Cooper tried to reduce its dependence on the Big Three, according to the Q&A. But most of its new ventures “didn’t pan out.” And as the document dryly notes about the people who pushed these new initiatives, “some of them no longer work for the company.”
Through a spokeswoman, Jack Cooper declined to comment on the Teamsters document.
A new contract between the Teamsters and Jack Cooper is part of the restructuring. The Teamsters, just before Jack Cooper filed for Chapter 11 protection, said it would not impact wages. At the time of that announcement, there were few other details of the contract.
But the Teamsters document reviews several more details of the pact, including a provision allowing “purchased transportation.” As the Teamsters posed the question, “The ‘purchased transportation is new and generally not used in car-hauling to my knowledge. Why is it necessary and won’t it eliminate some jobs?”
The response is that the “work preservation” provisions in the master agreement covering car haulers is “very tight.” The response also states, “The sole purpose of this new section is to allow the new company to try to protect its existing contractual business when there are plant holds or production surges.”
The explanation goes on to say that demand for car-haulers created by production spikes now are usually assigned to non-union carriers. By allowing Jack Cooper to utilize purchased transportation, “(the company) will be able to designate what loads must be given away. They can keep the high revenue loads and give the less profitable to the purchased transportation provider. This reduces the revenue to our non-union competitors and keeps the brokerage fee within the company.”
If the rank and file votes down the contract, the Teamsters’ document says they expect overflow business to go to non-union carriers.
“We hope and expect that the manufacturers will get some satisfaction from the fact that new Jack Cooper will be a much more financially stable company going forward and be better able to provide good service with new equipment in the years to come,” the Q&A said. “If this is rejected, this will likely result in the business being shut down and its assets liquidated.”
Notably, the Teamsters for a Democratic Union (TDU), a dissident group within the Teamsters, does not appear to be opposing the contract. In a post on its webpage, the TDU raises questions about some of the voting procedures but does not appear to be recommending a “no” vote.
In an earlier statement about the Jack Cooper-Teamsters agreement, the TDU identified six locals that opposed the deal, but said the majority of locals had voted to recommend it to its members.
Under the terms of the agreed-upon plan, junior lender Solus will own 100 percent of the stock of the “new” Jack Cooper. It is the entity that will be investing in the new company to allow the purchase of new equipment.