Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Less-than-truckload (LTL) carrier YRC Worldwide Inc. said today it had made a preliminary proposal
to acquire Arkansas Best Corp., a deal that ostensibly would include its unionized LTL division, ABF
Freight System Inc.; its nonunion expedited transportation business; its truck brokerage operations;
and other units.
According to a source close to the situation, a preliminary offer of $18 per share was—and
may still be—on the table for Arkansas Best.
The source said it was unclear if the proposal was an all-cash deal or a combination of cash and other financing
instruments. In less than a week, Arkansas Best's stock has jumped from $10.33 a share to close at $16.71 per share today, up $1.36. At current share prices, the company's market capitalization stands at slightly more than $394 million.
As of March 31, YRC's liquidity—which includes cash, cash equivalents, and available funds under a $400 million
asset-based loan—was $214.8 million, the company said when it released its first-quarter results earlier this week.
The recent surge in Arkansas Best stock coincided with a May 3 announcement that ABF and international leaders of the
Teamsters union had agreed on a tentative five-year contract containing an undetermined level of wage and benefit concessions.
ABF, which has the highest labor cost structure in the LTL industry, has stressed for months that it needs to bring its labor
expenses in alignment with its rivals, many of whom are nonunion, in order to remain competitive.
YRC CEO James L. Welch implied in a statement today that he and YRC will not take no for an answer. "Our board and
management believed then and believes now that the combination of Arkansas Best and YRC would be in the best interests
of all employees, customers, and shareholders of both companies," he said.
Fort Smith, Ark.-based Arkansas Best said last night that Welch met with CEO Judy McReynolds on March 22 at
Arkansas Best's headquarters to discuss a possible combination. Arkansas Best said in its statement that YRC
approached it in late March with an interest in exploring a possible deal only for ABF, which accounts for roughly
80 percent of Arkansas Best's revenue. However, Arkansas Best said it told YRC in early
April that ABF had other issues on its plate and that "considering a transaction with YRC was not appropriate
at that time." The companies have not talked since then, according to the statement.
Today's statement from Overland Park, Kan.-based YRC took on a slightly different tenor, seeming to suggest that
Arkansas Best was receptive to a transaction. According to the statement, McReynolds discussed the proposal with her
company's board of directors, but Arkansas Best declined to enter into talks with YRC because the "timing was not right
to consider such a transaction."
Neither company would comment beyond their respective statements.
LABOR IN LIMELIGHT
Organized labor will play a critical role in determining the future of any YRC-Arkansas Best combination or
if a deal has any future at all. Word of the CEO discussions and the possible acquisition by YRC leaked out as
ABF and the Teamsters are trying to consummate a new five-year collective bargaining agreement. Labor and
management are currently operating under the second of two one-month extensions to the existing five-year
contract, which originally expired March 31. The current extension expires May 31.
According to the source, Teamster officials bargaining with ABF were unaware until recently of any high-level
discussions over a possible transaction. By the time they were notified, contract talks were at an advanced stage,
according to the source. Neither the 7,500-member ABF rank-and-file or officials of Teamster locals representing the
workers knew of YRC's interest in their company before news of it appeared last night on DC Velocity's website.
A spokesman at Teamsters headquarters in Washington declined comment.
Officials of the various Teamster locals are scheduled to meet the week of May 20 to review the contract proposal.
Should the local leaders approve it, they will then need to sell it to a scrappy and independent group of rank-and-file
workers. Three years ago, they rejected a contract offer that called for significant
concessions similar to what union workers at YRC granted the company to keep it afloat. The rejection came after Teamster
leaders approved the deal.
There are several scenarios in play at this time. The rank-and-file could choose to accept the proposed contract. Union members could also reject the contract proposal, and both sides could return to the bargaining table. If that happens, the existing contract could be extended again for an agreed-upon time period. Alternatively, operations could continue without a contract, although such a move would be dicey because the union could call a strike without
notice on or after June 1.
In the current environment, however, there is another factor to consider: A rejection by the rank-and-file would likely
send Arkansas Best's stock falling, which ironically would make it cheaper for a potential suitor to buy the company. It
could also make Arkansas Best's board and management more willing to sell because they may see little hope of making a
significant change in their labor cost structure.
Arkansas Best said it was "very pleased" with the May 3 agreement. It noted that ABF Teamsters would remain the best paid in the LTL sector. However, the source said the tentative contract didn't deliver the magnitude of concessions that management wanted.
In mid-2009, YRC's rank-and-file agreed to a series of extraordinary concessions calling for 15-percent wage cuts
and an 18-month suspension of the company's pension contributions. YRC resumed contributions in 2011, but at levels
75 percent below what it was contributing prior to the 2009 deal. Full pension payments are set to resume in 2015.
The agreements sparked a lawsuit by ABF against the Teamsters and YRC alleging the deals were struck outside of the main
collective-bargaining agreement governing the trucking industry, and they should be made null and void. Despite several setbacks,
ABF has continued with its suit.
In return for the givebacks, the Teamsters were given the right in 2011 to name two directors to YRC's board. One is Douglas
O. Carty, co-founder and chairman of Switzer-Carty Transportation Inc., a Canadian company specializing in school bus
transportation services. The other is Harry J. Wilson, a former financier who today is chairman and CEO of Maeva Advisors
LLC, a New York-area company that holds itself out as a non-traditional corporate restructuring concern.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.