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Teamsters Union Organizing New Labor Laws for FedEx

In February, Teamsters Union President James Hoffa asked Congress to enforce FedEx Corp.'s air express workers to operate under the same labor law that governs their competitor, UPS Inc.  Mr. Hoffa also said they would "organize 100,000 workers at FedEx" in the event that this law is enforced.

Workers at FedEx Express's air express unit are governed by the Railway Labor Act (RLA). This act was imposed in 1926 and covers workers in the airline and railroad industries. All FedEx Express employees are covered under the RLA regardless of their involvement in aircraft operations and maintenance.  However, UPS workers, who are represented by the Teamsters Union, are covered under a different statute known as the National Labor Relations Act (NLRA). The NLRA governs workers in trucking and other industries.

In 2009, Rep. James L. Oberstar (D-Minn.) was able to include language in legislation that passed the House of Representatives, but did not pass in the Senate. This legislation would have permitted the RLA classification to include only those express carrier employees who are pilots and airplane mechanics, and perform that type of work.

Comment: With the current makeup of the Congress and potential seat changes after the November 2010 elections, look for the unions to press the RLA issue and “Card Check” strongly in the months ahead.  If either FedEx’s status concerning the Railway Labor Act (RLA) is reversed or Card Check is passed, transportation cost will increase dramatically.

There is no doubt that FedEx is facing some difficult times ahead.  Changing FedEx’s governance to the NLRA or the passing of “Card Check” alone would damage FedEx’s ability to compete.  However, both changes combined would be staggering. Some writers have suggested that rates may increase as much as 20% if the Teamsters are successful in organizing FedEx.  While we agree that FedEx would be forced to increase rates 20%, seems high. 

However, the piece of this equation we should be focusing on is how this will impact the market as a whole.  With the loss of DHL in the domestic US market last year, we are left with only two national parcel carriers.  In our mind, whether the playing field is truly level at the moment is not the point.  What matters is that we currently have a situation where there is a good amount of competition in the market.  Impeding FedEx’s ability to compete with legislation/reform will tip those scales dramatically.  The inevitable result will be decreased competition.  We are not predicting the end of FedEx if these issues move forward; however, we do believe shippers’ interests will be damaged as FedEx will be less able to compete in a market where there are already only two players.  Congress should consider carefully the impact of such legislation.  “Leveling the playing field” is an admirable goal.  However, if doing so starts the needle swinging from duopoly toward monopoly, it may pay to take a moment and consider.  Is decreased competition and increased prices the message Washington wants to send in these difficult economic times?”

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YRC Worldwide, Inc. Suffers Losses in 2009

YRC Worldwide Inc., the nation's largest less-than-truckload (LTL) carrier by sales, suffered a 2009 pre-tax loss of almost $900 million, compared to a 2008 pre-tax loss of $1.147 billion. In the fourth quarter of 2009, YRC announced a pre-tax income of $50 million.  However, YRC announced a $95 million operating loss in the fourth quarter, which was an increase over the $118 million loss in the third quarter.

In the fourth quarter, shipper uncertainty over YRC’s financial stability and selling off of YRC’s other business units were reasons YRC continued to see significant declines in shipment volumes. The company's national LTL unit National, reported a consistent 39% decline in total daily shipments. Its regional unit (USF Holland, USF Reddaway, New Penn) announced a nearly 20% percent decline.

Comment: Shippers must keep a close watch on potential developments in the near term.  While YRCW has been able to obtain concessions from the Teamsters on wages and benefits, their overhead cost structure (Debt & Terminal Network) is an enormous financial drain on their cost flow.  It would be advantageous for shippers to develop a carrier backup and pricing plan in the event of a quick shutdown of operations by YRCW.

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Limits on Emissions on Hold by Obama Administration

In late 2009, U.S. legislation proposed to put limits on emissions from motor vehicles, coal-fired plants and factories. This bill was placed on hold by the Obama Administration. However, many industry analysts say that a retaliatory version will be proposed again in 2010.

Therefore, supply chain experts think shippers should be prepared and concerned.  Many have already been affected by local or regional laws, and it is hard to determine the effect of another law.

The U.S. Senate Energy and Natural Resources Committee Chairman is letting shippers know that it is very doubtful Congress will be able to pass this Cap and Trade legislation this year. This bill is aimed at reducing greenhouse gas emissions this year. Then again, Sen. Jeff Bingaman (D-N.M.) says emission reductions may be forced by federal regulators.
Sen. Bingaman is not alone in anticipating extenuating plans. Among supply chain professionals, the concern is the effect on the costs related to transportation.  Based on new directives from the Obama Administration, the Environmental Protection Agency (EPA) will attempt to regulate and control emissions. 

Comment: While the Cap & Trade legislation failed to garner significant support and passage in Congress, the Obama administration is intent on subjecting the transportation / shipping environment to controls through regulatory rulemaking. This will drastically affect carrier cost and ultimately shipping rates.  A group including motor carriers, businesses and several members of Congress has filed a lawsuit in federal appeals court challenging the U.S. Environmental Protection Agency’s finding that greenhouse gas emissions are a danger to public health.

Shippers should begin now to examine their transportation networks and what alternatives are available in order to streamline and optimize their supply chains.  Shippers need to conduct their research and due diligence now on potential supply chain optimization consultants, should strict enforcement be handed down by the EPA.

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2009 Was a Tough Year for Those Charged with Protecting Freight

Various sources have shown in 2009 it appears there are more attempts at cargo theft, as sign of hard economic times. For example, in August 2009, LoJack Supply Chain Integrity found that the number of thefts at carrier facilities increased more than 300% during the second quarter, compared to first quarter.

A new Freight Watch International report finds that truck cargo thefts in the US increased substantially in 2009, similar to 2008. According to this report, 859 US truckloads were stolen in 2009, up from 767 loads in 2008 and 672 in 2007. This is an average of 72 thefts per month, with the majority of them full truckload thefts.

In addition, truckloads containing $487 million of goods were stolen in the U.S. in 2009, an incredible 67% increase over the $290 million worth of products in 2008.  

The reporting of such incidents is far from standardized; due to most companies keeping freight theft incidents quiet. Therefore, other groups may come up with somewhat different totals.

"In the past two months, we've seen such an increase that it's to the point where criminals are just wreaking havoc," says Sander Lengyel, a detective sergeant and squad leader in New Jersey State Police's cargo-theft unit. "They'll pretty much steal anything," he added.

LoJack says overall trends imply that organized crime rings are becoming increasingly bold in their pursuit of cargo, even stealing from secure areas with monitoring and surveillance systems. Freight Watch agrees, saying that organized theft gangs are now frequently stealing trailers and then leaving them hidden and unattended for several days to see if the loads have hidden tracking devices. Electronics is the number one target of thieves, representing about 23% of all incidents in 2009.

The good news for US shippers and drivers is that the thefts in the U.S. tend to be non-violent; of the 859 incident, just 13, or about 2%, were hijackings. In many other parts of the world, including some parts of Western Europe, truck hijackings are much more prevalent.

Thefts involving food and beverage (excluding alcohol) were up even more in 2009 though, rising from 124 incidents in 2008 to 170 in 2009 – an increase of 37% year over year. Certain electronics sub-sectors were especially lucrative. For example, Freight Watch reports 23 incidents involving cell phones with an average loss per incident of over $2 million. Food and beverage thefts now represent 20% of the total incidents.

Comment: Shippers of high value products, especially electronics, must be more conscious of their carrier’s security policy and procedures.  Does the carrier have GPS tractor and trailer tracking capabilities?  Require the carrier to provide their specific security procedures to ensure that they comply with your standards.

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Trucking Failures Increase 4th Quarter 2009

Avondale Partners reported trucking company failures increased in the fourth quarter of 2009 and will continue to rise this year. This is due to fleets in the worst financial shape run out of cash and creditors run out of patience with them.  The report said a total of 445 fleets failed in the fourth quarter, compared with 375 in the year-earlier period and 405 in the third quarter of 2009.  The failures meant a total of 21,010 trucks were removed from service.   Avondale Analyst Donald Broughton said the failure rate will rise in the first quarter as credit standards are tightened.

Comment: As more carriers are unable to survive the economic downturn and are forced to shut down their operations, shippers over the road carrier options will continue to dwindle.  As carriers face less competition in the marketplace, they will be more likely to incrementally increase pricing on those lanes where competition has been reduced.  Shippers must be aware of their core carrier’s financial status to ensure that an unexpected operational shutdown does not result in missed shipments or shipments moving at excess cost.   

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