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As trucking firms report demand declines they are doing whatever it takes to reduce costs, including renegotiating their union wage contracts and reducing overall capacity wherever possible.
The tentative deal that YRC recently struck with union employees for a 10 percent wage cut will provide $225m to $250m in savings when combined with non-union employee cuts in January. In exchange for the wage cut, YRC will offer its union employees a 15 percent stake in the company.
YRC is not alone among truckers looking to reduce costs, given the current level of overcapacity and outlook for LTL demand heading into 2009. Con-way Freight reduced its nationwide workforce by approximately 8 percent, or about 1,450 positions due to lower tonnage volumes, down 3.8 percent in October and 9.2 percent in November, respectively, from last year's levels
The American Trucking Associations' seasonally adjusted truck tonnage index, which measures the weight of freight hauled by U.S. truckers based on membership surveys, fell to its lowest level in five years in October. And Stifel Nicolaus analyst John Larkin says he expects the trucking industry to shrink more through capacity reductions and bankruptcies over the next four months. With trucking demand expected to slump in 2009, engine maker Cummins is cutting jobs and idling plants.
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