The Teamsters union has notified less-than-truckload carrier Yellow Corp. that it can no longer use outside transportation capacity to move its freight, according to a document obtained by FreightWaves.
Friday’s letter from John Murphy, Teamsters National Freight Industry Negotiating Committee co-chair and Teamsters national freight director, to Bryan Reifsnyder, Yellow’s head of trucker relations, said required 30-day notice was being given “that the use of purchased transportation is no longer permitted by any of the Yellow operating companies covered by the Yellow NMFA [National Master Freight Agreement].”
The letter follows the Teamsters’ Thursday rejection of Yellow’s proposed change of operations, which would consolidate terminals at regional carriers New Penn and Holland with YRC Freight locations and redefine work rules for some union members. The same day the union also said it had canceled an upcoming meeting with Yellow regarding the matter.
Yellow (NASDAQ: YELL) and other LTL carriers use purchased transportation to solve for capacity shortfalls within their networks. The process is typically deployed in linehaul operations and involves the use of outside truckload fleets or intermodal rail service to move shipments longer distances.
Purchased transportation expense accounted for 14.3% of Yellow’s revenue last year. The expense line normally represents a mid-teen percentage of annual revenue for the carrier.
The labor contract says Yellow is allowed to use third-party capacity for up to 29% of total over-the-road miles, inclusive of intermodal rail miles, at YRC Freight. The threshold at regional carrier Holland is 8%.
The use of purchased transportation is permitted in the contract to “generate growth and additional job opportunities for bargaining unit personnel by enhancing YRC Freight’s ability to compete in the marketplace.”
There are no metrics provided by Yellow that show the actual miles purchased transportation represents. The carrier said it had “an internal focus of retaining the optimal freight mix relative to human capital availability throughout 2022” in its annual filing.
“Purchased transportation is a necessity at many trucking companies, including Yellow,” a spokesperson from Yellow told FreightWaves. “The use of PT allows us to move additional loads to better serve our customers, however, Yellow has been focused on reducing over-the-road purchased transportation due to slack demand over the last several months.”
Across the industry, carriers have been lowering exposure to third-party capacity, which is subject to market rates, following the recent freight boom. When the market tightened, carriers were forced to pay significantly higher rates for outside service and often found themselves at the mercy of other providers, which impacted service.
Yellow’s contract stipulates the use of purchased transportation can’t be at the expense of union employees and that it is not to be used in locations where road drivers have been “laid off for economic reasons.” It does clarify the term “layoff” to exclude drivers who have declined a transfer tied to a change of operations.
“Purchased transportation usage should be engineered to the fullest extent possible to minimize its use and to maximize the use of bargaining unit employees and to allow bargaining unit employees to perform preferential runs and maximize earning opportunity,” the NMFA states.
Purchased transportation is not to be used outside of linehaul operations, according to the NMFA. Pickup and delivery, local cartage, drayage and shuttle operations must be performed in house.
Disputes over usage will be referred to regional and national grievance committees, the contract says.
Yellow maintains the network restructuring is vital to its survival as it struggles to maintain profitability and looks to minimize its debt burden ahead of maturities next year. A similar overhaul in the Western portion of the network at YRC Freight and Reddaway was recently completed.
“We have been working in good faith with the IBT to come to an agreement on proposed changes that would modernize Yellow and better enable us to compete in a marketplace that is populated by non-union carriers,” Yellow’s statement said. “We are disappointed that IBT leadership is unwilling to engage in mutual conversation about the future of our 22,000 union employees. We believe that respectful, constructive dialogue is always important.”
The allowance of purchased transportation is also outlined in other union-LTL carrier labor contracts, including ArcBest’s (NASDAQ: ARCB), which expires at the end of June. Whether the Teamsters will use the provision as a bargaining tactic in those negotiations remains to be seen.
Shares of YELL were off 11% midday Monday when compared to the Wednesday closing price of $2.19, the last close ahead of the announcement that the Teamster’s had rejected the changes.
More FreightWaves articles by Todd Maiden
- What is NMFTA and what does it do?
- Teamsters reject Yellow’s proposed changes again
- Knight-Swift to remain on M&A prowl, still looking at LTL targets
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Jim
As someone who works for an outside carrier I delivered there. I felt as though I was delayed intentionally. At 12 noon 1 pallet was left on my truck while the union employee went to lunch. After the hour lunch the forklift operator removed the pallet and “forgot” to tell the supervisor with my paperwork he was done. Then after waiting 30 minutes I go walking thru the open warehouse to find my supervisor myself. It was not like I was taking any work from them I was bring freight to them for them to break up and deliver. I hope they do go on strike we will see how long it takes the rest of the market to gobble up what they are to important to do.
James
Employee thousands of teamsters across the country. Best benefits bar none. Shows the aptitude of the work force when they would rather be unemployed.
Victor
I know that just a couple of spoiled, holier than thou, laid off Teamsters from Yellow are not representative of the entire workforce but I have to say that both sides of this company are causing problems. I was in LTL work until I got smart and quit. The company was taking advantage of the employees and nobody would stand up to management. But employees have to be willing to be flexible and reasonable. Just because you’re union doesn’t mean you’re infallible.
Freight Zippy
The toothless teamsters are just making noise. Yellow will do as they please.
While the union may have a point about poor management, it is only because any decent manager will refuse to work in a union environment. Thus they are stuck with leaders who do not care. Much like the union members.
It is odd that once people in management leave Yellow, they automatically become great managers at other carriers????? How does that happen?
The best thing for the industry is for this cancer of a company to shut down once and for all. Yellow is the poster child for corporate welfare. With $700 million from Trump and $120 BILLION from Biden for pensions this trainwreck of a trucker needs to take a perminate nap.
Trucker chuck
Using outside carriers when you are looking to close terminals is obviously a contract violation. Glad to see the union standing up to yellows decades of mis management. Every time yellow has purchased a profitable company they have destroyed it. Roadway, now new penn and holland, time for management to look in the mirror. They tried a super regional carrier with Roadway in 2009, didn’t work, why is 2023 any different ?
GammerJammer
Everyone is always writing about low pay and dead end trucking jobs within the industry. Higher pay to drivers has a real impact on what other carriers must pay to compete for the driver pool. I support the leadership representing its drivers and wish more drivers had the organization power to change the culture, low pay and low respect factor we see everyday.
David DC Crisp
Let’s get something straight. UNION employees are not the issue. This company has spent millions of dollars on half assed schemes instead of just moving freight. It ain’t rocket science. It would seem the current CEO has made promises and claims that we will be the best company around however that ain’t happening. Stock prices in the $2.00 range is an absolute joke. Management is constantly trying an end run around the contract they signed to get this change of operation underway. Just last week Darren Hawkins suggested the change be put to a membership vote knowing ( or is clueless ) damn good well this can’t be done without opening the contract.
As for the obviously uneducated idiot above management can’t just shut everything down and sell off assets. That would take a vote from the board of directors and would also require filing bankruptcy on well over 1 billion dollars. I don’t suspect any of the investors would be willing to take a bath in all of that. There aren’t enough assets to cover the debts alone much less provide any value or return on investment.
As for the inmates running the asylum, you are entitled to your opinion however misguided and ignorant it may be.
Have a good day
Dick Bischoff
Teamsters positioning themselves as the tough guys with Yellow and TForce Freight, what a laughable joke this is. Neither company is in a position to fulfill the teamsters wish list. Purchased transportation is a necessity in today’s LTL environment, that is a fact and just common sense. Watching these negotiations is going to be very interesting. My money goes with management, the teamsters will either be unemployed or they’ll negotiate a reasonable benefit package.