Teamsters, ABF reach tentative contract deal, no details provided

by Michael Tilley ([email protected]) 649 views 

The International Brotherhood of Teamsters and Fort Smith-based ABF Freight have reached a tentative five-year labor agreement that now must be reviewed and submitted to a membership vote. Contract details were not made available.

News of the deal was posted late Wednesday (March 28) by the Teamsters, just three days before the existing contract is set to expire. Talks wrapped much sooner than in 2013 when contract negotiations ran into June, when the main body of a contract was approved. Supplemental regional provisions were approved in October 2013. ABF is one of the nation’s largest less-than-truckload carriers.

“No further details will be released until leaders from Teamster local unions that represent ABF members meet in the next two weeks to review the tentative agreement and approve sending it out for a membership ratification vote,” noted the Teamsters report. “The parties agreed to an extension of the current agreement to allow for the ratification process to take place.”

Officials with ArcBest, the parent company of ABF Freight, declined comment. An estimated 8,000 ABF employees are union members. ArcBest employs around 13,000.

The 2013 contract was negotiated in an economic environment during which ABF Freight was losing money and the national trucking industry was struggling to emerge from a freight recession. But times are much different. Heading into 2018, the trucking and logistics industry is poised to have a solid year thanks to regulations, driver shortages, and other factors resulting in more freight demand than freight-handling supply. Changes in the federal tax code are also expected to improve margins for companies like ABF. And ArcBest has been in the black the past few years. Full year net income totaled $35.57 million in 2017, $24.3 million in 2016, and $44.854 million in 2015.

Teamsters officials said earlier this year they were interested in sharing those gains with union members and not interested in a “concessionary contract” they approved in 2013.

Brad Delco, a transportation industry analyst with Little Rock-based Stephens Inc., along with associates Scott Schoenhaus and Tyler DuBay, noted in a March 28 investors note the pending labor talks were “much ado about nothing,” and the deal would be reached sooner rather than later.

“Our confidence around this is predicated off of reviewing how the process played out last time, with both sides working together to extend negotiations (with numerous extensions) to reach a tentative agreement. Bottom line, any noise around freight divergence is likely just that, noise, as we believe constructive progress is ongoing at this stage of the negotiation process,” the Stephens report noted.

When asked Thursday by Talk Business & Politics about the different economic environment, Delco said it’s true “the union has a lot more negotiation leverage” in 2018 compared with 2013 because of the tight labor market and other capacity constraints in the industry.

“On the other hand, you can look at it and say, ‘The industry back drop has been strong, and yet the margins that ABF Freight has been able to deliver has not been at the level of its non-union peers.’ So clearly their cost structure puts the company at a disadvantage compared to its non-union competitors,” Delco said.

Part of the margin crunch at ABF is the result of “gold standard” benefits provided to union members, Delco said. For example, covering 100% of healthcare (insurance) premiums is likely putting pressure on ABF margins, he said, which “sends a signal” to ABF its benefits need to be more in line with non-union companies.

Delco said the Teamsters also should be worried ABF could lose market share to non-union peers because of “misalignment” of benefits compared to non-union operators.

While it is unknown how or if the company was able to curb costs and how or if the Teamsters were able to avoid another concessionary contract, Delco said having a tentative contract already in place is a good thing for both parties.

“The good news here is they’ve already reached a tentative agreement.”

ArcBest shares (NASDAQ: ARCB) closed Thursday at $32.05, up 60 cents. During the past 52 weeks the share price has ranged between $39.70 and $16.95.