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Overnite faces strike
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September 23, 1999: 5:20 p.m. ET
Son of late union boss threatens strike of Overnite and pickets of customers
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Overnite Transportation Co., a trucking subsidiary of Union Pacific Corp. (UNP) is preparing for its first national strike, which would also be the first test of the Teamsters union under James P. Hoffa's leadership.
The son of the late union boss is vowing the unusual step of taking pickets to the customers of the trucking company, the 15th largest in the country, one of the top six in its sector of the trucking industry. The union has been sending letters to Overnite customers warning of the pending action as a way to try to apply pressure to the company.
The union has been waging the nation's largest organizing effort in decades at Overnite since 1994, trying to reverse the growth of nonunion carriers in one of the sectors of trucking in which the union still has influence, known as less-than-truckload. LTL carriers such as Overnite consolidate pallet-size shipments of freight through a series of terminals, rather than moving full trailers of freight directly from shipper to destination.
While the four largest carriers in the LTL sector are all unionized by the Teamsters, there has been growing competition from national and regional nonunion competitors since trucking was deregulated in 1980. Overnite is one of two national LTL carriers, along with Conway Transportation Services, a division of CNF Transportation (CNF), not operating under a Teamsters contract. In the past Overnite has been a key alternative for shippers when the Teamsters struck the other national carriers.
"If Teamster market share in trucking continues to fall we lose power - the bargaining power to win the contracts our members deserve and expect," Hoffa told a Teamster rally last week. "If we can no longer win those contracts we besmirch the history of our forefathers."
Hoffa's father, James R. Hoffa, was the union's most famous president and the one who first negotiated national trucking contracts. He was forced from office when he was sent to prison. He disappeared and is assumed to have been killed by mob associates as he was attempting to recapture power in 1975.
The organizing efforts have been costly to the company, once one of the most profitable in the sector, now the least profitable of the major nonunion carriers. UP announced plans last year to spin-off the division, but put that on hold later in the year, and it formally withdrew the IPO plan last week.
The company still plans the spin off when market conditions are favorable, according to Overnite spokesman Ira Rosenfeld. He said UP withdrew the filing because financial information had to be updated.
Even the stocks of leading trucking companies have been depressed in recent months due to concerns about rising fuel costs and interest rates, said Anthony Gallo, analyst for Deutsche Banc Alex. Brown.
"The IPO plan should probably have been pulled sooner," said Gallo. "It had been sitting there getting stale for some time. Given the concern about trucking stocks, this would have been a challenging time for an IPO even if they (the union and company) were dancing cheek-to-cheek."
Whenever it tries the IPO, it's unlikely UP will get a good price for Overnite, though. It is likely only to get between $400 million and $500 million for a company it paid $1.2 billion for in 1986. But UP can afford to wait for better conditions before trying the spin-off said Scott Flower, analyst at Solomon Smith Barney.
"In the long run, everybody wants some resolution. But that doesn't have to be next week," said Flower.
The company is not a major part of UP's revenue base, providing $526 million of revenue in the first half of the year to a company with total revenue of $5.5 billion, and only $25 million of the $803 million in operating income recorded during the same period. That makes the stakes for UP and its shareholders from the current labor battle somewhat muted said Flower.
"You'd rather have good news, good performance and happy labor," said Flower. "But given the size of (Overnite's) contribution, its' not going to hurt UP much. This is basically a rail company. It (a strike at Overnite) is not going to drive the stock down several points."
Overnite admits the union's efforts have hurt business, but not to the extent the union is claiming.
"While we are running some 7-8 percent ahead of last year both in tonnage and revenue, we feel we could be much stronger without the union's activities," said Rosenfeld. "They've had very limited success with (organizing) our employees. So now they are trying to intimidate our customers."
The union's unusual tactic of taking the pickets to Overnite customers is in some ways a concession that it does not have the strength at the company to shut it down yet. It claims it is forced to stage an unfair labor practice strike, which offers greater job protections for strikers than a contract negotiation strike, because of what it calls the company's illegal responses to its five-year organizing effort.
"We are offering this advanced warning so that your company will not become a victim of Overnite's self-inflicted labor unrest," said a letter sent to customers last week by Phil Young, the union's chief negotiator in that industry sector. "As part of their unfair labor practice strike against Overnite, the Teamster local unions have a legal right to picket customer facilities while an Overnite truck and driver are making pick-up or deliveries. The picketing will cease immediately following the departure of the Overnite truck and driver."
The union called off the 11-terminal strike in July after five days, but David Cameron, the union's campaign coordinator at Overnite, says it will keep this strike going until it wins assurances from the company on its organizing and negotiating efforts.
Cameron would not say when the strike is going to start, saying that field organizers will only be given a few hours notice. The threat of the strike may actually be as effective as the strike itself in scaring away customers, said analysts. Gallo says he doesn't believe the strike will be able to shut down much of Overnite's operations, but the tactic of taking it to the customers' locations will increase the union's clout.
"Certainly bringing a strike to a customers' location, it certainly does raise the profile," he said. "But I think it does everyone, including the union, a great disservice. It reminds the shippers that unionized carriers represent a risk to their distribution system."
The company says it is the union that has participated in illegal activities and intimidation. It also says it weathered previous job actions by the union at specific terminals without serious problems. The July strike at 11 of 166 terminals cut freight volumes about 3%, according to Rosenfeld, though he said the carrier recaptured much of that volume when the strike ended.
But the company admits that customers are concerned by the union threats and that it believes it is losing business.
"They don't want to become involved in this dispute, they don't want to see pickets at their sites," said Rosenfeld. "We've told the customers if there are any illegal activities, we will provide legal assistance."
The union claims to represent between 40 and 45 percent of the company's 10,000 hourly employees at 37 terminals. But due to legal challenges the company only recognizes 1,800 hourly employees at 22 terminals as being union represented, and it has yet to negotiate the first contract with any of them.
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