TFI International bought UPS Freight with plans to make the LTL carrier “lean and mean,” a turn of phrase CEO Alain Bédard likes to use. While the company is implementing that strategy, including recent cuts to salespeople, one thing it needs more of is truck drivers.
As of late July, Montreal-based TFI (NYSE:TFII) was employing 5% fewer Teamsters members — about 10,540 people — in the rebranded TForce Freight than the 11,100 UPS (NYSE:UPS) had as of Dec. 31, according to a recent SEC filing. While TFI and the Teamsters, which represent more than 75% of TForce Freight employees, declined to comment on the drop, sources close to the company and union said drivers had been leaving faster than they’re being hired.
The issue reflects, in part, a larger problem facing the trucking industry: hiring and retaining drivers. But comments made by Bédard to financial analysts in July suggested that the change in ownership compounded the issue.
“We had people retire when we took over,” Bédard said after TFI reported second-quarter financial results. “You know, we had some people say, ‘You know what. This is not UPS. Who are these guys? I don’t want to know who are these guys.’ So they just retired. OK, so we’re going through that now.”
The $800 million UPS Freight acquisition, completed on April 30, represented the most ambitious effort for TFI to date, adding a fleet of 6,300 tractors and nearly 200 facilities. The Canadian company has built itself into a North American trucking and logistics powerhouse by buying up and turning around companies with a mandate for ruthless operational efficiency.
Nothing, though, has approached the scale of UPS Freight.
Lack of drivers holding back volume growth
The lack of drivers hasn’t stopped TFI from improving TForce Freight’s profitability. In just a few months, the Canadian company brought the unit’s operating ratio from 99% — barely profitable — to below 95% by targeting unprofitable freight. However, as Bédard noted, the driver issue is one of the reasons why it doesn’t expect volumes to grow in 2021.
“I think it’s not possible. No. 1 is because, you know, we’re looking for drivers. We’re looking for dockworkers as we speak,” he said.
TFI also has the firepower to spend what it needs to in order to attract and retain drivers. The company generated nearly $300 million in net cash flow during the second quarter. It also is hoping that massive modernization of the aging fleet it acquired from UPS will help keep drivers happy.
TForce offering bonuses, hybrid mileage-hourly pay
TFI also would not comment on what it’s doing to improve recruitment and retention of drivers. TForce Freight does not appear to be chasing the eye-popping mileage rates being offered by other carriers, at least publicly.
Positions being advertised on behalf of TForce Freight on UPS’ website quote mileage rates in line with the minimums laid out in Teamsters contracts, which range from 50 cents to 72 cents per mile for long-haul drivers. TForce is free to go above those rates.
Some of the open over-the-road driver positions offer potentially lucrative packages. One linehaul position in New York was offering $25.50 per hour plus 65 cents per mile, while another in Pennsylvania included a bonus of up to $10,000 in addition to $17.70 per hour plus 50 cents per mile.
Beyond the rates, the unionized driver positions include a slew of benefits, such as vacation — which can eventually hit five weeks — health insurance, 401(k) and a pension. Though what happens to those benefits, particularly the pension, will be a big open question the current contract expires in 2023.
Bédard has on several occasions since the acquisition said that the largely unionized operation isn’t standing in the way of growing TForce’s profits. Meanwhile, the company and the union have a vested interest in ensuring that driver rolls remain filled.
TFI cuts sales staff after CEO bemoans high costs
On the sales side, TFI has been addressing what it sees as the opposite problem. Earlier in September, TForce cut a significant number of salespeople, who aren’t unionized, according to sources close to the company. TFI declined to comment on the cuts.
Bédard expressed displeasure with the costs of the sales side of the business. He told analysts in July that TForce Freight had been spending $350,000 a month on sales.
“I fell off my chair when I learned that — impossible,” he said. “So we are now working with the team to address [it]. This is not normal, guys. I mean, what are we doing?”
TFI’s stock has more than doubled since the UPS Freight deal was announced. Investors will get another glimpse at how the integration of the acquisition is going when the company reports third-quarter financial results, likely in late October.
Brian Hawkins
Looking for a driver job.
Anonymous Reader
I find it really funny that they say they are looking for drivers when all they have done since acquiring UpsFreight is cut runs. Drivers are going backwards, getting pushed back to lesser runs and making less money. When other companies out there are offering top scale with sign on bonuses and more miles with no dock work, you will certainly see a lot of drivers leaving this dog and pony show.
Mike Gusinow
Yes, agree. They want to hire drivers but now freight is slowing down. Drivers want to drive not work on dock. Even with bonuses they can’t attract drivers cause same management worries about numbers bills per hour, not servicing the customer. They don’t get the freight out, they trap it, store it. Dumb same ups freight mentality.
Joe
They’re cutting dock workers cause of bill count while holding 10 to 20 loads every night cause they don’t have enough dock workers. I agree same people running the place that can’t sail the ship!
Edward Benavides
I have a Class A CDL license with over 20 years experience. Where do I apply?
Dick Bischoff
go to tforcefreight.com , click on “about us” and then on “careers”.
Edward Benavides
I have a Class A CDL license. Where do I apply?
Dick Bischoff
go to tforcefreight.com , click on “about us” and then on “careers”.
Joe
Go apply and get ready to sit home by the phone. We don’t have equipment us drivers that been with UPS freight over 10 years are waiting around for trucks to show up. TM doesn’t scream loud enough to get equipment while line haul keeps road drivers out so no trucks come back.
R
ups freight sales people were just faces that showed up at businesses, they were NOT allowed to submit a competitive price quote. It was all controlled by the higher management, useless buffoons like UPS’s current CEO. If they’d been allowed freight would have been in the top 3.
Dick Bischoff
you note the monthly sales costs as $350,000.00, the accurate monthly number before they whacked 100 plus sales reps was $3.500,000.00 Leaving off a few zeros is a big deal. While I agree with the sales cuts implemented by Bedard and the cost savings of roughly 16 million dollars annually, his biggest problem is having bought a teamster union trucking company and trying to operate it as a lean machine and profitable machine in the USA. Bedard owns Vitran Express which used to have a huge presence in the USA. They closed their USA operations down in 2013 and sold their assets to Matty Maroun at Central Transport. Vitran Canada stayed open as a miniscule LTL carrier which Bedard purchased after their USA closure. Bedard has ZERO experience running a 3 billion dollar union carrier in the worlds largest deregulated market, Canadians have no experience playing LTL in this brutal marketplace. Two years from now Bedard will be in the battle of his life, negotiating a new teamster contract. The last contract negotiation under money bags UPS almost resulted in a union strike with the carrier shutting operations for almost a week in preparation of a walk out. With the economy on fire, and trucking companies demanding higher rates, rest assured the teamsters will be in no mood to accept any concessions to their current fat cat benefit package. TFI Int’l does not have the deep pockets that UPS does,Bedard no doubt will be looking to cut costs. The risk of a long and bitter strike looms large, it will be interesting to see what happens.