Large Carhauler Uses Bankruptcy to Toss Out National Contract

Following a familiar script, Allied Holdings — the largest carhauling company in North America—has filed for bankruptcy and is trying to force its workers to accept major givebacks. In response, the Teamsters (IBT) union is threatening to strike. Allied filed for Chapter 11 bankruptcy last July, and on April 26 the company asked the bankruptcy court to grant “emergency concessions.” These included a 10 percent wage cut over the next two months and a block on a twopercent pay raise due on June 1. The court agreed and on May 2 the cuts went into effect. Looking to push even further, Allied tried to backdate cuts to April 24, but the judge refused.

On June 8 the company asked the court to extend the wage cuts until September 30. The court will hear that motion on June 23.

Irate about the imposed cuts, nearly 4,000 U.S. Teamster drivers, yard workers, and maintenance workers at Allied voted in early June to strike if the court overturns the contract. (Allied employs another 1,000 IBT members in Canada, but the bankruptcy and court-imposed cuts don’t apply there.)

Allied has backed off from an earlier threat to have the court hear a motion to throw out the contract on June 30. The company has hinted that it may return to that tactic if negotiations do not go in its favor.

Allied is the single largest provider of new car delivery North America, delivering nearly half of all newly purchased cars and trucks. It also provides logistical services for the transportation and distribution of new cars.

DECLINING STRONGHOLD

The carhaul industry has historically been a stronghold for the Teamsters. For decades, the industry has been forced to bargain in one master contract: the National Master Automobile Transporters Agreement (NMATA).

Carhaul has also seen rank-and-file activity such as wildcat strikes, contract rejections, and militant union leadership.

But the balance is shifting against the union and its workers. The industry is still about 80 percent union, but small nonunion companies have grown and, to date, the IBT has not been able to organize them.

Concessions have also become more common in recent years and have not improved the strength of the union in the industry. In fact, Teamster officials brokered a two-year wage freeze at Allied from 2003 to 2005 in an attempt to “help the company succeed,” according to IBT Carhaul Division Director Fred Zuckerman.

Allied’s bankruptcy threatens to devastate the IBT’s remaining power in carhaul—unless the union can muster an effective response.

COUNTER-STRATEGY?

As in other industries beset by bankruptcies, the union is scrambling to put together a counter-strategy. Until the June strike threat, the IBT’s strategy was limited to legal maneuvering.

Skeptical of Allied’s claims about its losses, the Teamsters Carhaul Division has made requests for financial and operational information a main focus. The company has consistently refused, however, to turn over this information. On June 13, IBT President James P. Hoffa accused Allied of “…intentional neglect of the operating fleet in order to pay non-productive and exorbitant turnaround fees and bonuses totaling multimillions of earned revenue dollars.”

The Georgia court, however, has continued to buy Allied’s claims and support its giveback remedy.

“We are serious about striking,” said Zuckerman, “if the bankruptcy court authorizes [Allied] to void labor contracts —and they move to implement that.”

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A strike at Allied would have massive consequences within and beyond the carhaul industry.

LEVERAGE POINTS

“The leverage [of Allied workers] is huge,” said Allied carhauler and Detroit Local 299 member Jim Carothers. Carothers added that, if Allied were shut down, “there aren’t 3,500 drivers and rigs left in the rest of the industry to take up the rest of the work from GM and Ford.”

Indeed, industry observers say that Allied’s competitors simply do not have the capacity to handle the excess work if the company should liquidate. Allied’s second largest competitor, Performance Transportation Services (also represented by the IBT), is facing bankruptcy troubles of its own, and the other carriers make up only 30 percent of the market.

With more than 56 percent of all Ford and GM cars currently shipping through Allied, it seems the Teamsters could make use of the troubled auto makers’ dependence as a leverage point.

Though UAW leaders have not yet been successful in crafting a counterstrategy at Delphi, they have had some success in pressuring GM (who buys the majority of its parts from Delphi) to pressure Delphi for limited power over that company’s bankruptcy proceedings. Delphi’s moves to throw the contract out completely have been repeatedly pushed back, in part due to GM’s intervention. And, unlike Delphi, Allied cannot move its hauling work overseas.

Pressure from external companies with a vested interest in Allied has, in fact, already been at play to some extent. Yucaipa, a California-based investment firm that has loaned the company $30 million to cover debts, asked Allied managers not to abrogate its contract with the union.

“We are working with our members,” said Zuckerman, when questioned about pressuring auto makers for external leverage. “We are not working with the Big Three.”

According to rank and filers, however, the IBT has done little work to mobilize its members for a fight with Allied.

“No, there hasn’t been any real preparation,” said Carothers. “People here in the industry are militant…We voted unanimously here at Local 299 to strike.”

Ava Miller, an Allied carhauler in Flint (where they also voted unanimously to strike), made a similar observation: “People are angry, but we haven’t seen the union out there building up a strike.”

BANKRUPTCY AS WEAPON

Allied appears to be following the bankruptcy playbook crafted by companies in the steel, coal, airline, and auto industries. For many unionized companies, bankruptcy is no longer just a last resort to get back on stronger financial ground, but a way to open contracts up mid-term and impose concessions.

In fact, in a number of recent cases, companies have even been able to declare a loss and file for Chapter 11 bankruptcy despite shifting money into foreign operations (Delphi) or into a financial holding company (Mesaba Airlines).

Bankruptcy courts, often chosen by companies based on their tendency to rule in favor of employers, have increasingly gone along.

Union resistance has been virtually nonexistent. Eleventh-hour surrenders to company demands—before the court actually rules—are the current norm. In all recent bankruptcy cases (except for mechanics at United Airlines in 2004), the threat of the court throwing out the contract has been enough to force skittish union leaders to agree to cuts.

It remains to be seen if the Teamsters can find enough strength at Allied to break out of this downward pattern.