by Marty Cook
Posted 12/16/2013 12:00 am
Arkansas Best Corp.’s Dec. 4 announcement that it hoped to close 22 more terminals did not come as a surprise to industry analysts, who were expecting just such cost-cutting moves by the less-than-truckload carrier based in Fort Smith.
The filing with the Securities & Exchange Commission noted that ABF Freight, Arkansas Best’s largest subsidiary, had already closed eight terminals in the second half of this year. Closing 22 more would leave the company with 247 terminals.
Now, it’s just a matter of waiting for approval of the change of operations by the Teamsters, the union that has approximately 7,500 members on the ABF Freight payroll.
ABF Freight said in the filing that it was meeting with local unions that would be affected by the proposed closings and requested that the Teamsters hold a hearing on the proposal in January. Arkansas Best officials said the plan was devised after market research and use of software that showed the optimal use of assets, but union approval is still required.
“That’s what being a union company is all about,” said Kathy Fieweger, Arkansas Best’s vice president of corporate communications. Fieweger said the company wouldn’t publicly announce which terminals would be closed until the plan was implemented — if the plan goes through, of course.
The filing said that, after implementation of the plan, Arkansas Best would discuss specific expected cost savings at its first-quarter conference call in April. Fieweger said that combining operations from smaller terminals into nearby larger ones nearby would affect about 100 workers, seven of whom would be unable to transfer to the consolidated terminals.
A Teamsters spokesman declined to comment on the proposal.
ABF Freight is one the dwindling number of unionized truckers, and the propose-and-wait filing is a reminder that negotiation is required on more than just wages. ABF Freight and the Teamsters recently reached a five-year labor agreement that includes a 7 percent cut in pay.
“The unionized carriers are getting fewer and fewer,” said John Ozment, the Oren Harris Chair of Transportation at the University of Arkansas’ Walton College of Business and a member of the Arkansas Trucking Association board of directors. “ABF Freight in the past has had a good, strong working relationship with their union.”
There are benefits to using union labor. In an industry that struggles with driver turnover — although that is less of a concern for LTL companies — ABF Freight has consistent single-digit turnover rates. That stability can translate into higher productivity and lower training costs.
“Arkansas Best has always spoken very highly of their unionized workforce,” said Brad Delco, a transportation analyst with Stephens Inc.
It’s no secret that union labor earns higher wages than nonunion, but analysts said that is offset by higher productivity. One criticism of union labor is that the union doesn’t allow workers to do multiple jobs, but Ozment said specialization can enhance productivity.
The expected cost savings of the terminal closings should help Arkansas Best’s bottom line and make its stock more attractive to investors. Delco said Arkansas Best had talked publicly about consolidating terminals for efficiency, so the SEC filing was anticipated.