Monday, July 19, 2010

Handling Unions Right In Montreal and Wrong At YRCW

Productive enterprises at the Port of Montreal show us the right way to handle unions - lock them out of their jobs when they get unruly:

The action at 8 a.m. EDT followed mounting tensions that began with the Maritime Employers Association's call for a new labor agreement and the union's refusal in recent weeks to work overtime hours aimed at clearing cargo at Montreal. The lockout was intended to pressure union leaders “to look more realistically" at the jobs situation ahead, said the Montreal branch of the Maritime Employers Association.

Take that, fat slobs!  Big-time kudos to the Maritime Employers Association up north for doing right by their shareholders and customers.  Diverting traffic will cost them some business in the short run but will earn them the respect of the business community over the long run.  No one wants commerce to be held hostage to the limited work hours of workers who don't really want to work. 

It would be terrific if American companies could adopt the same common-sense approach.  Let's start with YRC Worldwide, where shareholders concerned about the firm's survival have to contend with whining from unions about lost pay and benefits.  Some time spent walking a picket line might actually be good for drivers if it helps them burn calories and lose weight. 

While they're painting their protest signs (replete with spelling errors), they should note that last week's news release from YRCW trumpeting a "confirmed expected positive EBITDA" for Q2 comes with a bunch of caveats that render it meaningless.  The biggest warning is the net cash usage from operating activities.  Less cash on hand means less ability to pay bills.  Even union drivers should be able to figure that one out.  Furthermore, amending their loan facility netted the company $22mm worth of flexibility against a looming bond payment of $21.7mm due in August.  Learning-impaired drivers who flunked high school math might not realize that this hole will prove hard to fill, as any creditor willing to grant such a facility probably covets the assets securitized against the loan.  That's a bet on bankruptcy, folks.  The rest of the bullet points in the news release amount to little more than hope; begging customers for a few more loads, stretching out negotiations with its lending group, selling more assets, and other tactics will only stall for time.  They will not materially change business conditions on the cusp of a double-dip recession.

I'll be happy to watch YRCW's flame-out from the sidelines if it forces unions to take a hard look at their bleak futures.  The next market crash (perhaps precipitated by a Hungarian insolvency contagion) will be a hard wake-up call.  The Port of Montreal is attempting to answer that call successfully before it arrives.  There's still time for YRCW to do the same.  Hammer your unions hard if you want to survive. 

Full disclosure:  No position in Canadian logistics providers or YRCW.