With only a few logs rolled, ABF, Teamsters already at loggerheads
Company warns of pension crisis that will require action; union wants to cap intermodal, purchased transportation expense, restore lost ground from 2013.
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.
It's still early, but talks to hammer out a collective-bargaining agreement between ABF Freight, the less-than-truckload unit of ArcBest Corp., and the 8,200 full-time Teamsters union members who work for the unit is shaping up to be just as difficult as the last go-round five years ago.
Negotiations resumed on Monday in Kansas City after two rounds of talks that moved the needle a bit, but not by much. ABF said in a memo last Friday that progress had been made on unidentified "mutually agreeable" language, but that "significant issues" remain to be discussed. The memo did not mention the core issues still on the table, but they no doubt mean employee wages, and perhaps more important, the cost of the company's pension plan, which is significantly higher than that of YRC Worldwide Inc., ABF's only unionized rival. The five-year ABF-Teamster contract expires March 31.
The two sides first exchanged proposals on Dec. 18, with the Teamsters' freight division seeking cost-of-living adjustments for each year of the contract and ABF calling for an across-the-board wage freeze effective July 1, 2018. The company has agreed to restore one week's vacation for union members that was eliminated in the 2013 contract, with the condition that the two sides identify cost savings to offset the increased expense associated with adding back the vacation week.
As part of the 2013 agreement, the rank and file took an up-front 7-percent wage cut that was to be restored in increments over the contract's life. ABF said that has happened, though some on the Teamsters side aren't so sure. Ken Paff, national organizer of the Teamsters for a Democratic Union (TDU), a dissident group that clashes regularly with union leadership, said the increases were actually cost-of-living adjustments pegged to levels that were adjusted downward once the 7-percent cut took effect. As a result, Paff argued, the front-ended cuts were not restored at all. ABF vehemently disagrees with that rationale.
ABF Teamsters have a reputation for not going quietly, as evidenced by the set-to through the summer and fall of 2013, when about 1,800 workers in the Midwest refused to sign off on their local supplements attached to the national master contract. The main contract had been ratified in June, but couldn't take effect until all supplements were ratified. The members threatened to authorize a strike vote, which union leaders warned could cause such a disruptive ripple effect that it would force ABF to shut down. The members backed off, however, clearing the way for the supplements to be ratified and the current contract to take effect.
The dynamics are different this time around. The U.S. economy and freight demand are in better places than they were in 2013. Less-than-truckload (LTL) carriers, which were emerging from a disastrous rate-cutting cycle in 2013, have since discovered pricing discipline, and along with perkier demand, that has emboldened them to raise prices repeatedly in recent years. Ernie Soehl has replaced Tyson Johnson as head of the union's freight division, a change which has a "jury's still out" feel to it.
The wild card is Fred Zuckerman, head of Teamsters Local 89 in Louisville, Ky., and leader of a movement called "Teamsters United." Zuckerman came within a whisker of defeating incumbent James P. Hoffa in the union's 2016 presidential election, and Teamsters United won six seats on the union's 24-member board.
Zuckerman, a voluble and aggressive leader, is expected to play a major role in shaping the union's ideology in talks with ABF and in the much-larger contract negotiations underway with UPS Inc., the Teamsters' largest employer, whose contract with the union expires in August. ABF Teamsters voted overwhelmingly for Zuckerman in the 2016 election, according to Paff.
On Tuesday, Teamsters United announced on its website that locals in Chicago; Louisville; Columbus and Dayton, Ohio; Kansas City; and Harrisburg, Pa., among others, voted to authorize Teamsters leaders to call a strike if the situation warranted it. A strike authorization vote is procedural, and doesn't automatically lead to a walkout.
On the site, the group put ABF on notice that "we are coming together to restore what we lost in the last contract and to win improvements." It added that ABF "needs to see that we will back our union negotiators when they fight for improvements, and that we will vote 'No' if they settle short and try to sell us another substandard deal."
PENSION CRISIS
The fate of the contract could very well turn on the pension gap between ABF and Overland Park, Kan.-based YRC. As part of a 2009 agreement to keep YRC solvent, its rank and file, who are also represented by the Teamsters, took draconian pension cuts, dropping their benefit to the equivalent of $1.75 an hour. The ABF pension, by contrast, provides benefits equal to $7.83 an hour, ABF said in the memo. The YRC-Teamsters collective bargaining agreement was extended for five years in 2014 and expires in March 2019.
The pension discrepancy, along with generous health and welfare benefits and wages that "are at the top pay rates" of the LTL industry, puts ABF at a cost disadvantage when competing for business, according to the memo.
Another problem facing Fort Smith, Ark.-based ABF is that about half of its pension payments go to retirees who never worked for the company. That's because ABF was part of a multi-employer pension scheme negotiated decades ago when the trucking industry was heavily unionized, regulated, generally in good financial health, and chock-full of carriers. Under the scheme, companies in the multi-employer plan were required to contribute to the pensions of each other's workers, and would continue to do so even if truckers who had employed some of those workers went out of business.
ABF, which said it has made $1 billion in pension contributions in the past decade and $750 million since the last contract, said "very little, if any, of this money" will go toward the rank and file's retirement benefits. In words that echo similar warnings made by ABF in the months leading up to the 2013 compact, the company said in the memo that unless the pension issue is resolved, "we must find other ways to achieve an affordable contract."
For its part, the union wants to establish a classification of "utility employees," who would function as cartage jacks-of-all-trades and be paid an hourly premium over other workers. It has demanded that ABF's use of rail intermodal and purchased transportation services—the latter being services not performed by union drivers—be capped at 20 percent of total annual miles, and that the level of purchased transportation not exceed 4 percent of ABF's total annual mileage. The union also proposed that for every mile driven by an outside carrier, 10 cents would go into an account whose proceeds would be equally disbursed to bargaining-unit drivers by Jan. 30 of each calendar year of the contract.
The Teamsters are sensitive to initiatives proposed by any carrier that hint at siphoning away driving work from bargaining-unit employees. The union opposes any initiatives by companies to use such equipment as autonomous vehicles and drones, though it recently withdrew its opposition to UPS using them.
In June 2012, ArcBest, then known as Arkansas Best Corp., acquired Panther, an expedited delivery provider, in an effort to add services beyond asset-based LTL. In 2013, ABF's "premium logistics and expedited freight" segment, which was composed of Panther, posted revenue of $246.8 million, a bit more than 10 percent of the company's $2.3 billion in total revenue. In 2017, the "ArcBest" unit, which is made up of Panther and the company's truckload and dedicated truckload businesses, generated revenue of more than $706 million, about 25 percent of $2.82 billion in overall revenue. The company does not break out revenue streams between Panther and the two truckload operations.
The core LTL operation generated a shade over $1.99 billion in revenue last year; in 2013, the unit's revenue was $1.76 billion.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."