IE 458 STRATEGIC MANAGEMENT

SPRING 2010/1431
CASE STUDY 1-1 ROADWAY EXPRESS INC.

Use the concepts that you have learned in this course, namely,
External Analysis and the five forces model,
Internal Analysis and the VRIO Framework
Competitive Advantage by cost leadership or product differentiation
To analyze this case and answer the questions stated in page 1.

Case 1-1: Road Way Express, Inc.

As the summer of 1997 came to a close, a cloud hovered over the future of Roadway Express,
Inc. Although Roadway had just come off a prosperous year in 1996 following two years of red
-ink, their contract with the Teamsters Union was set to expire on March 31, 1998. The
Teamsters, which set wages and benefits for most of Roadway Express, Inc. workforce, had just
completed what many considered a dramatic bargaining victory over United Parcel Service.
Following a strike by the Teamsters which severely hampered UPS and slowed commerce in
the U.S. economy as a whole, UPS made sweeping concessions to the union on wages, benefits,
and rules governing the use of part-time and temporary workers. Many observers believed that
the Teamsters would be emboldened to seek similar victories in upcoming bargaining. Roadway
and other national less-than-truckload (LTL) trucking firms appeared to be the likely next
target. Roadway faced the challenge of both continuing to respond to intense competition from
nonunion carriers while being threatened with the increased costs that a new labor agreement
was likely to bring. Could Roadway absorb the kind of increases in wages and benefits that
UPS had conceded to and still be able to compete with nonunion carriers on freight rates? If
not, what were their strategic alternatives?

History of Roadway Express, Inc.

Though Roadway Express, Inc. had existed as a corporate entity for only a short time, its
history in LTL trucking was a long one. Roadway Express had been a subsidiary of Roadway
Services, Inc., but was spun off January 2, 1996. The former parent company, which was
renamed Caliber System, Inc., focused more on regional and interregional freight transport
using nonunion carriers. Though Roadway Express had existed as a stand-alone entity only
since 1996, it had been active in LTL trucking since the former parent company was founded in
1930. For decades Roadway Express had been among the six largest providers of LTL
transportation. In 1996 Roadway was considered one of the "Big Four" national LTL carriers
along with Yellow Freight, ABF Freight Systems, and Consolidated Freightways. Roadway also
offered service to and from another 62 countries worldwide. The carrier shipped general
commodity freight in the United States and within Canada and Mexico through its subsidiaries.

General commodity freight included apparel, appliances, automotive parts, chemicals, food,
furniture, glass, machinery, metal and metal products, nonbulk petroleum products, rubber,
textiles, wood, and miscellaneous manufactured products. Roadway's primary focus was on
freight services involving city-to-city routes that required two days or longer in transit.
U.S. Trucking Industry
Analysts generally divided the U.S. trucking industry into two categories: less-than-truckload
(LTL) carriage and truckload (TL) carriage. LTL service involved the transit of loads of less
than 10,000 pounds. For a national LTL firm, this service typically involved a hub-and-spoke
network of terminals and consolidation centers to efficiently transport freight. Freight was
collected from shippers, and then taken to terminals. Terminals were large warehouses with
many large loading ramps and garage doors to facilitate rapid unloading, sorting, and reloading
of freight. At the terminals, freight was unloaded, resorted, and then reloaded on to trucks.
Freight on these reloaded trucks was then routed to regional consolidation centers where it was
again unloaded, resorted, and reloaded on to other trucks bound either for final destinations are
other terminals. The handling and rerouting involved in LTL shipments necessitated
sophisticated logistics systems, so that carriers could track any item shipped. TL carriage; on
the other hand, involved shipments of freight greater than 10,000 pounds. These shipments
generally went directly to the destination without the unloading, sorting, and reloading typical
of LTL shipments. With TL carriage, trucks picked up a full truckload of goods from the sender
and then transported them directly to the receiver of the shipment with no handling of the goods
in between. Because TL shipments required no intermediate handling, TL carriers did not need
the advanced tracking and logistics systems characteristic of the LTL market.
The U.S. trucking industry had been heavily regulated through much of its history, but
had been largely deregulated in 1980. The Interstate Commerce Commission (ICC) had
regulated competition in trucking beginning in 1935. Regulation was a response to intense
lobbying from railroads who were threatened by the growth of the trucking industry. The ICC
restricted the entry of new firms and the growth of existing firms. Prospective entrants into a
market were required to obtain certification before they were able to operate. When a

prospective entrant applied for certification to operate on a particular route, carriers who
already served the market where the entrant intended to operate were given the opportunity to
protest the need for a new entrant. Existing carriers generally did make such protests. The result
of this process was that the ICC usually offered a certificate to a new carrier only after existing
carriers were given the chance to offer the services proposed by entrants. The net effect of this
regulation was that for many years the number of trucking firms remained almost constant. In
1960, there were 16,276 ICC regulated carriers compared to 16,005 in 1975. Prices were also
tightly regulated. Price floors were established by regional pricing bureaus. These price floors
essentially precluded any price competition between carriers.
The Motor Carrier Act of 1980 deregulated both entry and price. The Act greatly eased
the restrictions on new carriers and gave carriers pricing freedom. By the end of 1991 there
were 47,890 ICC certified carriers in operation. This figure did not include another 100,000 or
more individual owner-operators who served as independent contractors for trucking firms.
Another significant presence in the industry were private trucking fleets that served the inhouse needs of large firms such as grocery or discount chains. Many of the ICC certified
carriers were owner-operators or small, nonunion firms that focused on specific city-to-city
routes. Pricing freedom resulted in sharply reduced rates in many cases. A sharp increase in the
number of carriers ceasing operations or filL'1g for bankruptcies also followed the 1980 Act.
LTL Market
The LTL market included two segments, long-haul and regional. National LTLs used a network
of costly hubs (consolidation centers) and spokes (terminals) to distribute freight. Analysts had
estimated that 400 terminals and 13-15 hubs would be adequate to offer national service. Many
of the regional carriers, in contrast, were able to service their geographic areas with much less
investment in network infrastructure. Major LTL carriers had reduced their consolidation
centers and terminals by 25 percent between 1992 and 1996. This reduction had cut costs and
shortened transit times where goods had been handled less. The number of times goods were
handled directly affected shipping costs. Large LTLs handled freight an average of 1.9 times per

shipment in the early 1990s. Industry analysts estimated that a national LTL could save
$750,000 for every .1 reduction in the number of times a shipment was handled.
Competition for freight was based primarily on price and service. The most important
component of service was transit time. The hub and spoke system made competing on transit
time more difficult. Carriers could reduce transit time through more direct routes as opposed to
routing shipments through hubs. This avoided much of the time needed in handling and sorting
goods. Some carriers had also adopted "sleeper" teams of drivers to reduce transit times. A
sleeper team involved the use of two drivers and allowed a truck to operate for a greater
proportion of time since regulations limited the number of hours an operator could drive in a
day. Service on timing of deliveries had improved significantly and had reached the point where
some carriers were offering two- and three-day guaranteed delivery schedules for the first time
in national LTL shipments. Regional shipments typically involved less handling of freight.
Labor
The largest component of costs for LTL carriers was labor. National LTL firms were covered
under a uniform bargaining agreement with the International Brotherhood of Teamsters which
industry participants termed "the contract." The contract stipulated wages, benefits, and
various-l rules regarding aspects such as what a union member could or could not do in a job,
the use of nonunion labor by carriers, and the use of temporary and part-time workers. Many of
the regional carriers were nonunion and thus enjoyed lower labor costs and freedom from
inflexible union rules. For example, the agreement with the Teamsters banned union drivers
from loading or unloading within 75 miles of a terminal. This lack of flexibility meant that if no
dock workers were available, then cargo sat idle.
Equipment and Fuel
Aside from labor, equipment and fuel were the other major costs for LTLs. Several major
tractor manufacturers supplied trucks to the industry. The most commonly used size trucks
could be purchased for little more than $100,000. Little savings could be gained by purchasing
in volume. Fuel constituted a major cost for trucking firms. Firms used swaps, options, and

long-term contracts to hedge against fluctuating fuel costs. For example, approximately 20
percent of Yellow Corp. anticipated fuel costs for 1997 were covered under various types of
agreements. Changes in fuel costs typically exerted a short term impact on profitability. If fuel
prices rose dramatically, carriers were often not successful in fully passing the increased costs
on to customers. Thus, profits dropped. On the other hand, when fuel prices fell significantly,
carriers sometimes experienced a short-term profit windfall.
Customers
Millions of customers purchased freight services. No single customer accounted for a large
percentage of the industry's revenue. Competition for freight was based primarily on price and
service. Customers tended to be price sensitive. In many cases, they would switch from one
carrier to another for a small price savings, even as small as less than one percent. The most
important element of service was transit time. While customers valued reliability and on-time
delivery, these service elements were often taken for granted and were not criteria by which
carriers could differentiate themselves. Some customers were coming to rely on LTLs for more
than just the physical transport of goods. These customers (package recipients) wanted carriers
to be able to locate shipments on demand and verify that senders were shipping the required
goods. In effect, they sought to outsource much of the shipping and receiving function to LTLs.
Such demands required LTLs to make additional technology investments and develop
additional logistical capabilities.
Non-LTL Freight Services
Customers had alternatives to LTL in shipping goods. TL carriers were viable for large
shipments. Premium freight such as Federal Express and UPS was suitable for smaller, timesensitive shipments. And, intermodal (or multimodal) which involved the use of both trucks and
rail to ship goods was being used increasingly.
Truckload Freight. Since TL shipping required no intermediate handling of freight, its
cost structure was much different than LTL. TL carriers did not require investments in

terminals, consolidation centers, or in logistics and tracking systems. Most TL carriers were
nonunion and were able to pay drivers less than union wages. To become a TL carrier required
little more than to purchase or lease a truck and a chauffeur's license. Many small firms
competed in the TL segment. Revenues from TL freight had risen to $98.8 billion in 1995 from
$71.1 billion in 1991 (see Exhibit 1). This compared to $58.1 billion in 1995 and $46.6 billion
for LTL. LTL tonnage rose 3 percent in 1996 while truckload tonnage dropped 2.8 percent.
Intermodal transport involved combining multiple means of transportation such as rail,
trucking, or ocean shipping to transport goods. Most often, intermodal involved combining a
rail segment with truck transport to deliver goods. Trailers that could be either pulled by trucks
or carried on railway flatcars made intermodal feasible. Since railroads had costs as much as
10-15 percent below that of trucks for long haul transport, and trucks could provide the
convenience of door-to-door pick-up and delivery, intermodal was seen as a way to achieve
greater efficiency without sacrificing service. Roadway was a leader in using intermodal. It
found significant savings by using rail for over 23 percent of its total linehaul miles. Yellow and
CFMF also used intermodal for over 20 percent of their miles. ABF, with less than 10 percent
of its miles in intermodal, used intermodal less than the rest of the big four LTL carriers. The
LTL industry had also increased its use of intermodal, going from 11.1 percent of vehicle miles
in 1994 to 21 percent in 1997. There were drawbacks in using intermodal, however. Intermodal
typically took longer to ship goods than did trucks because of the use of rail. Thus, some
observers believed that intermodal involved a tradeoff in service to customers who were
sensitive to the time required to deliver freight. Another obstacle in the use of intermodal was
that the 1994 agreement with the Teamsters limited intermodal use to no more than 28 percent
of vehicle miles.
Premium Freight providers such as Federal Express and UPS were the likely choice for
shippers who had small packages to send or 'who needed next-day delivery. The premium
providers both restricted and to a large extent standardized the size of packages they processed.
This allowed them to achieve a high degree of automation and efficiency in their operations.
Like the LTL fi.rms, premium freight carriers possessed national networks of terminals and the

ability to pick up and deliver packages. UPS, with its fleet of trucks and network infrastructure,
possessed many of the same assets and capabilities as LTL carriers. UPS did some LTL

Exhibit 1 Trucking and Courier Services (SIC 421) Estimated Motor Carrier Revenue, by size of Shipments Commodities Handled, and Origin and
Destination of Shipments: 1991 Trough 1995.

1995

Millions of Dollars
1994
1993
1992

1991

1995

% Change
1994 1993

1992

1995

% Total Motor Carrier Revenue

1994
1993
1992

1991

Total Motor Carrier

Revenue:
Size of Shipments

155,971

149,160

135,383

127,049

117,732

4.6

10.2

6.6

7.9

100

100

100

100

100

58,147
97,824

55,445
93,715

52,075
83,308

49,119
77,930

46,626
71,106

4.9
4.4

6.5
12.5

6.0
6.9

5.3
9.6

37.3
62.7

37.2
62.8

38.5
61.5

38.7
61.3

39.6
60.4

23,156

21,795

19,941

19,390

17,850

6.20

9.30

2.80

8.60

14.80

14.60

14.70

15.30

15.20

unrefined:
Building materials:
Forestry, wood, and

3,125
8,502

2,631
8,904

2,259
8,477

1,890
7,247

1,748
5,966

18.8
-4.5

16.5
5

19.5
17

8.1
21.5

2
5.5

18
6

1.7
6.3

1.5
5.7

1.5
5.1

paper products:
Chemicals and allied

11,613

10,959

9,304

8,441

7,559

17.8

10.2

11.7

7.4

7.3

69

66

6.4

products:
Petroleum and petroleum

7,431

7,049

6,607

6,350

6,071

5.4

6.7

4.6

4.8

47

49

50

5.2

products:
Metal and metal

3,888

4,044

3,746

3,734

3,954

-3.9

0.3

-5.6

2.5

2.7

2.8

2.9

3.4

products:
Household goods:
Other manufactured

14,085
10,886

13,193
9,772

12,018
8,647

11,038
8,144

10,697
7,416

6.8
11.4

9.8
13

89
6.2

3.2
9.8

9
70

88
66

89
64

97
64

91
6.3

products:
Other goods:

21,818
51,467

21,842
48,971

18,696
45,688

17,109
43,706

15,733
40,738

-0.1
5.1

16.8
7.2

9.3
4.5

8.7
7.3

14
33

14.6
32.8

13.8
33.7

13.5
34.4

134
34.6

Less-Than-Truckload:
Truckload:
Commodities Handled
Agricultural and food
products:
Mining products,

shipping and clearly possessed the capacity to enter more heavily into the LTL segment if it
chose to do so.
Competitors
Roadway's three major national competitors were Yellow Freight System, CF Motor Freight,
and ABF Freight Systems. Like Roadway, each had experienced a decline in operating margins
in the decade preceding 1997. In 1987, each had enjoyed operating margins in the four to five
percent range. Those margins had declined to less than three percent for all four by 1996 (see
Exhibit 4).
Roadway's largest competitor with 1996 revenues of over 52 billion was Yellow Freight
System, Inc. Yellow freight was the largest division of The Yellow Corporation accounting for
77 percent of its revenues. Yellow Corporation also operated three regional LTL carriers:
Preston Trucking Company, Saia Motor Freight, and WestEx. Another subsidiary, Yellow
Technology Services provided logistical solutions to customers. Yellow Freight expanded
internationally in the 1990s. Expansion into Asia in 1996 followed a move into Europe four
years earlier. International expansion was a top priority for the firm in 1997.
Yellow Freight had implemented a vigorous cost reduction program. Cost savings from
improvements in pickup and delivery and reduced general and administrative expenses had
been achieved. The carrier reduced terminals from 449 in 1995 to 334 in 1996. This reduction
along with a write-off of computer software resulted in a $46.1 million special charge. Yellow
Freight also sought to improve its operations in other ways. Organization restructuring into five
geographic business units was implemented by Yellow Freight to give front line employees
more authority to respond quickly to customer requests.
Yellow Corporation did not report financial results for Yellow Freight, but the
corporation as a whole had lost money in 1996, 1995, and 1994. Yellow Freight instituted a
general rate increase of 5.8 percent in January 1996, which applied to customers without longterm contracts. Tonnage declined by 2.8 percent while revenue per ton increased by 2.4 percent.
Operating expenses for Yellow Freight were up just 0.6 percent in 1996 despite higher fuel
costs and the 3.8 percent increase in union wages and benefits imposed on all the national
LTLs.

CF MotorFreight (CFMF) was spun off from Consolidated Freightways, which subsequently
changed its name to CNF. CFMF had been the poorest performer of the national LTLs despite
extensive cost reduction efforts. CFMF had reduced the number of its terminals from 650 in
1992 to 380 in 1995. Routes had also been restructured to reduce freight handling and increase
the amount of city-to-city shipments. Despite these efforts CFMF had not been able to achieve
profitability. With CNF's other subsidiaries all occupying leadership positions in their niches,
some analysts believed the spin off was part of an effort to emphasize CNF's other businesses.
ABF Freight Systems had become a national LTL carrier after deregulation by pursuing a
strategy of aggressive acquisitions. Historically, ABF had fewer terminals and consolidation
centers than the other of the "big four," but still operated more than 300 terminals. ABF also
enjoyed the highest operati.l1g margins of any of the "big four" and the highest growth rate.
In addition to the "big four" several interregional carriers and many regional firms
competed for LTL business. These firms tended to be nonunion and enjoy cost advantages
because of their lower labor costs, lower investment in infrastructure, and more direct routing
which reduced handling. As a result, the regional and interregional LTLs enjoyed higher
operating margins than the "big four" (see Exhibit 2). Despite the numerous competitors,
though, capacity in the industry had declined in the mid 1990s. Some regional carriers, such as
Viking Freight, had attempted to forge virtual national carriers out of networks of regional
truckers, but none had succeeded.

Roadway's Strategy Marketing

Marketing
Roadway's marketing strategy centered around developing stable, long-term relationships with
customers. Yet, Roadway served over 500,000 customers in 1996. No customer accounted for
more than 2 percent of total revenues in 1996 and the ten largest customers accounted for less
than 10 percent of revenues that year. Nevertheless, Roadway worked with individual
customers to identify possible efficiencies in serving a specific account where both the

customer and Roadway could benefit.

Exhibit 2 Commercial Freight Distribution 1996

Despite this emphasis, Roadway had not

been immune from aggressive price
competition, Profit margins suffered during
1995 as the firm lost $12.7 million during a
year of intense discounting. Freight rates
rose 5.7 percent in 1996 and Roadway
adopted a less lenient discount policy. Rates
had remained stable in 1996 and early 1997.
Roadway attributed the increased stability in
rates to a reduction in industry capacity.
Roadway offered or negotiated discounts

Trucking
Private, interstate
Private, local
National TL
Local TL, for-hire
LTL, National
LTL, Regional
Package / express (ground)
Total trucking
Railroad
Pipeline (oil & gas)
Air freight, domestic
Air freight, international
Water (Great Lakes / rivers)
TOTAL

Bil. $

% of Total

110
90
60
40
9
9
24
342
36
26
25
15
7
451

24.4
60
13.3
8.9
2.0
2.0
5.3
75.8
8.0
5.8
5.5
3.3
1.6
100.0

with many customers. These discounts were

Technology and Operations
negotiated on an account-by-account basis,
Roadway operated 30 major consolidation/ distribution centers and 424 terminal facilities in
1996. The 30 centers were located in strategic locations throughout the United States. Of the
424 terminal facilities, Roadway owned 285 and leased the other 139. These leases were
generally for terms of three years or less. The company owned 9,665 tractors and 30,082
trailers. For tractors and trailers used for intercity transport, the average age was 7.6 and 9.0
years respectively, Freight handling capacity was typically measured by the number of loading
spaces. Roadway owned 11,861 spaces and leased another 1,905. Consolidation centers
accounted for 5,340 of these loading spaces.
Cost reductions were attributed to several Improvements. Increased use of rail lines to
transport freight in linehaul operations was a major element in cost reduction. Roadway also
had achieved a leaner network infrastructure. Roadway's 424 terminals was down from 585 at
the beginning of 1995. The company planned to reduce its network by another 30 terminals in
1997. Roadway executives anticipated that the elimination of these terminals would reduce

Exhibit 3 Trucking Industry Operating Statistics.

OPERATING

CARRIER
1. Roadway Express
2. Yellow Corp.
3. Consolidated Frways
4. Conway Western
5. ABF Freight
6. Overnite Trans.
7. American Freightways
8. USF Holland Mtr. Ex.
9. Watkins Motor Lines
10. South Eastern Freight
Lines
Total

INTERMODAL

REVENUES

INCOME

LTLREVENUES

TLREVENUES

LTLTONNAGE

TLTONNAGE

MILES

MILES

(MIL.$)
1995 1996
2,255 2,339
2,339 2,324
2,015 2,052
1,049 1,171
1,006 1,103
976 961
572 729
527 595
475 535

(MIL.$)
1995 1996
(21.2) 36.7
(6.4) 30.1
(51.6) (79.3)
95.4 101.3
(6.4) (8.4)
(29.7) (48.0)
30.8 27.1
43.7 51.4
24.2 28.1

(MIL.$)
1995 1996
2,038 2,128
2,116 2,109
1,834 1,868
978 1,094
895 983
872 896
528 680
478 542
421 479

(MIL.$)
1995 1996
217.2 211.3
221.6 213.4
178.7 183.3
71.1 77.2
110.5 113.7
103.8 65.4
44.9 48.8
49.7 53.6
50.1 52.2

(TONS)
1995 1996
6.0 6.2
6.9 6.7
5.6 5.7
4.5 4.7
2.9 3.0
4.0 4.2
2.9 3.6
2.9 3.3
1.2 1.3

(MIL. TONS)
1995 1996
1.4 1.4
1.6 1.5
1.2 1.2
0.8 0.8
0.8 0.8
1.5 1.2
0.5 0.6
0.6 0.7
0.3 0.3

(MILLIONS)
1995 1996
500.7 487.2
614.5 582.4
476.8 448.3
271.5 295.6
296.5 285.0
306.1 275.5
182.2 237.3
139.0 155.3
182.1 198.7

(MILLIONS)
1995 1996
147.8 168.0
124.1 128.8
133.8 120.3
2.1 1.7
19.2 31.0
47.4 45.8
0.0 0.0
0.0 0.0
0.0 5.1

264
11,478

304
12,114

Source: American Trucking Association

20.5
99.3

17.2
156.2

237
10,397

277
11,061

26.1
1,074.7

27.7
1,046.6

1.6
38.4

1.8
40.6

0.6
9.4

0.6
9.0

63.4
3,032.8

82.6
3,047.9

1.8
476.2

2.8
503.5

fixed costs and increase network utilization. Claims on freight shipped declined by 11.2 percent
in 1996, which indicated improved freight handling. Roadway attributed this improvement to
network refinements which reduced the number of times freight was handled in unloading,
som'1g, and reloading. Improved freight handling techniques were also cited as a reason for the
decline in claims. A decline in depreciation expenses was another reason cited for the reduction
in costs. The decline resulted from fewer terminals, a greater proportion of fully depreciated
equipment, and limited capital expenditures in prior years.
Exhibit 4 Comparison of LTLs on Key Measures.

5-year return on
Company
Unionized national LTLs
ABF Freight System
Consolidated Freightways
Roadway Express
Yellow Freight System
Nonunion regional LTLs
AAA Cooper Transportation
Estes Express Lines
USF Bestway
Nonunion interregional LTLs
American Freightways
Con-Way Transportation
Old Dominion Freight Line

Revenues (mil.$)

Operating margin

5-year growth rate

capital

1,105
2,238
2,523
2,408

2.8%
0.9
2.2
2.5

7.1%
0.0
2.8
0.3

8.7%
-10.0
16.6
7.7

316
356
121

10.3
13.2
11.9

12.1
23.4
6.1

40.0
29.1
25.8

794
1,374
308

4.7
8.7
5.6

29.8
15.1
13.4

12.9
41.0
17.3

Human Resources
Approximately 75 percent of Roadway's 25,500 employees were represented by unions. Most
were represented by the International Brotherhood of Testers. Wages and benefits were
governed by the Master Freight Agreement ("The Contract"). Under the contract, union labor
wages and benefits increased 3.8 percent in 1996 and another 3.8 percent on April 1, 1997. LTL
drivers received, on average, wages of $18 to $19 an hour and pensions of $2,500 a month. On

Exhibit 5 Statements of Consolidated Income, Roadway Express, Inc. and Subsidiaries

average,

1996

Revenue
Operating expenses:

1995
1994
(dollars in thousands, except per share data)
2,372,718
2,288,844
2,171,117

Salaries; wages and benefits

Operating supplies and expenses
Purchased transportation
Opera ting taxes and licenses
Insurance and claims
Provision for depreciation
Net gain on sale of carrier operating
property
Total operating expenses
Operating income (loss)
Other (expense) income:
Interest expense
Other, net
Income (loss) before income taxes
Provision (benefit) for income taxes
Net income (loss)
Net income (loss) per share
Average number of common shares

1,544,926
409,900
193,640
75,041
50,856
62,681

1,545,000
395,170
158,494
74,720
54,826
71,669

1,512,235
388,268
105,486
74,031
46,913
75,750

(8,256)
2,328,788
43,930

(267)
2,299,612
10,768

(2,628)
2,200,055
28,938

(1,764)
304
(1460)
42,470
20,582
21,888

(3,098)
(9)
(3,107)
(13,875)
(1,206)
(12,669)

(3,218)
1,443
(1,775)
(30,713)
(9,268)
(21,445)

1.07
20,533,219

(062)
20,556,714

(1.04)
20,556,714

outstanding

Roadway's union workers were paid more than 20 percent more than their counterparts in
nonunion LTLs. In their 1997 agreement with UPS, the Teamsters had negotiated a 15.5 percent
wage increase in wages to an average of $23.05 an hour. The agreement also included a 50
percent increase in pensions to 53,000 a month for drivers with 30 years of service. UPS had
contended that the strike was premeditated and intended to prop up the Teamsters' image and
political clout in the months leading up to the union's presidential election. One effect of the
UPS strike was that it led shipping customers to place greater importance on using multiple
transportation providers, so that subsequent strikes would have less impact on their businesses.
Roadway experienced a 24-day strike by the Teamsters in April of 1994 following the
expiration of the previous Master Freight Agreement. The Master Freight Agreement was
scheduled to expire on March 31, 1998. Many observers expected the Teamsters to push for
major concessions from the national LTL carriers on wages and benefits. Historically, the
Teamsters had not given ground on wage rates and benefits even though their membership had
significantly declined.
While many industry observers had noted the high cost and relative lack of flexibility of
Teamsters' labor, Roadway's company documents argued that the Teamsters' provided
advantages for the carrier. Among the advantages noted were a stable workforce, a very low
turnover rate of under 3 percent, and experienced employees who understood the LTL business

and thus made fewer mistakes and were more efficient. Another advantage of Teamster labor
cited by Roadway was an outstanding safety record, which led to greater reliability and less
freight damage and claims for Shippers.