Favorable Union Vote Opens Path for Struggling YRC Worldwide to Begin Repaying Debt
Formerly known as Yellow Freight, YRC Worldwide was formed in the 2000s when the less than truckload carrier began gobbling up smaller trucking companies, such as Roadway Express, Holland, USF and others. All of these purchases were made with borrowed funds, and when the economy took a sharp downward turn in 2008, YRC Worldwide was left with a massive $1.4 billion bill and no way to repay it. Lenders refused to renegotiate the loans until the company was able to solidify their contract with the labor force. The first vote did not go the company’s way, with 61 percent of workers turning it down. However, last week the company and the Teamsters union were able to negotiate an extended contract that works for both parties. Workers are accepting reduced vacation time, lower payments on pension plans, and a significant 15 percent cut in wages. Parts of the deal are good through 2019. The deal with their labor force saves the company about $350 million each year.
The deal also gave Teamster union members stock interest in the company, as well as the ability to nominate two of their members to the company’s board of directors. This gives the union and workers more leverage to negotiate future contracts, but it also gives them some responsiblity to help the company out of its financial predicament.
This labor settlement opened the way for YRC worldwide to renegotiate the debt repayment plan with its creditors. The debt was reduced by an estimated $300 million. Still, this leaves the struggling YRC Worldwide carrying more debt than all the other less than truckload carriers operating in the United States combined.
At one point during their financial troubles, YRC Worldwide ceased paying pension plans entirely. With the new deal, pension payments resumed, but the company is paying just 25 percent of the pension payments it paid out in 2009.
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