Ryder's Rocky Road To The Bargaining Tableby
When Ryder System Inc. and other car-haul companies sat down to negotiate a new labor pact early this year, Ryder was determined not to give in to the Teamsters again. In their last go-round with labor, in 1992, the trucking companies had agreed to limit the growth of nonunion subsidiaries. This time, Ryder planned to stand firm against such demands. As the largest hauler, with a third of the market for new-car transports, Miami-based Ryder figured it was better-positioned than rivals to withstand a strike.
Ryder badly miscalculated. It tacitly admitted as much on Oct. 3, when the company agreed in secret talks with the Teamsters to ease its hard line on the use of nonunion labor. That freed up the union and the industry to resume talks on Oct. 5. "There have been discussions that have brought down some of the barriers to negotiations," confirms Steven C. Nichols, a senior vice-president of Ryder's car-haul unit. The two sides should have a new pact soon, insiders say.
UP THE JUNCTION. Why is Ryder backing down now? The Teamsters waited to strike until after the slack summer season for car sales. And when the union moved on Sept. 7, it moved only on Ryder. The result: While rivals have continued to ship cars to dealers' lots, Ryder's car-haul unit will lose $10 million pretax in the third quarter, the company estimates, vs. a $9.6 million profit during the same period last year.
Ryder's largest customers were hit, too. The strike was part of the reason General Motors Corp.'s September auto sales showed only a disappointing 0.3% increase over a year earlier. Chrysler Corp.'s sales plunged by 6.6%. "We're losing sales because we don't have product," fumes Ken Hubble, general manager for Herb Chambers Dodge in Danvers, Mass. Lack of inventory has cut his autumn sales by $100,000, he says. Meanwhile, his dealership still is being invoiced for cars stuck at the railhead.
Ryder's main mistake was in thinking it could quickly and easily ride out a strike. Many of the 16 other car haulers whose labor pacts expired on May 21 have been trying to undercut the Teamsters' $17-an-hour average wage with new, often nonunion units. However the other carriers were less aggressive about shifting business to such units than Ryder. Because car hauling comprises only 14% of its $4.6 billion in sales, Ryder figured it had more financial clout to withstand a strike. It also knew that the union had to borrow $15 million to get through a 1994 freight strike and had cut weekly payments to strikers to $55, from $200.
So when the other car haulers were ready to give in to the Teamsters, Ryder balked. "We were very close and the Teamsters exited the talks because they felt they could not reach an agreement with Ryder," on this issue, says R. Ian Hunter, the chief negotiator for the industry bargaining association. Says Teamsters negotiator Doug Webber: "Ryder overreached."
Ryder tried to hold its tough stance after the strike began. It sued the union in federal court and sought an injunction by the National Labor Relations Board. The agency, however, rebuffed Ryder's claim that the strike was illegal. The lawsuit, which contends Ryder is losing $1 million a day in revenues to the strike, is still pending. Ryder didn't anticipate such losses, which will slice third-quarter earnings by some 15%, to about $35 million, says Gruntal & Co. analyst Steve Lewins. "When [the strike] started we were hopeful that it could be resolved within a week and wouldn't have much of an impact," says Ryder Chief Financial Officer Edwin A. Huston.
Meanwhile, pressure has been growing from the car companies. GM ships about 60% of its cars and trucks with Ryder, while Chrysler ships some 40%. (Ford uses Ryder for less than 10%.) GM will have to close plants if the strike continues much longer, says Burnham Securities auto analyst David Healy.
Ryder may yet emerge from the strike with more freedom to use non-union labor than its rivals. But it may take a lot of explaining to convince shareholders that it was all worth it.