Arkansas Best reaches prelim deal with Teamsters union (15% pay cut to save company)

[Omaha Steve]

http://www.reuters.com/article/idUSSGE63J0KC20100420?type=marketsNews

Co, Teamsters union tentatively agree to 15 pct wage cut

* Co cautiously optimistic of ratification

* FBR upgrades stock; sees $0.81/shr benefit to '11 EPS

* Shares off 3 pct (Rewrites throughout, adds company comments)

By A.Ananthalakshmi

BANGALORE, April 20 (Reuters) - Arkansas Best Corp (ABFS.O) and the Teamsters union agreed tentatively to a 15 percent wage cut to help the trucking company save costs as it struggles to be profitable.

However, shares fell after the union said the company was losing $10 million a month this year and liquidity continues to worsen -- one of the reasons it agreed to the pay cut.

About 6,000 Teamsters members were actively employed at ABF Freight, the company's largest less-than-truckload unit, according to the union's website.

"ABF has been exhausting its cash reserves at an unsustainable rate and cannot face losses of this magnitude for much longer, especially in a tight credit market where alternative financing has largely dried up," the union said.

The tentative agreement between ABF Freight and the union was reached on April 16, and was "overwhelmingly" endorsed by leaders of local freight unions, Arkansas Best spokesman Danny Loe told Reuters.

Loe said the company was "cautiously optimistic" about the ratification.

Dahlman Rose & Co analyst Jason Seidl said if the loss estimate by Teamsters was "even only remotely accurate," the company will report a significantly wider first-quarter loss on Friday.

"If this is correct, we would not be surprised to see another cut in the annual dividend when the company reports its first quarter results," Seidl said.

Arkansas Best slashed its quarterly dividend 80 percent earlier this year.

FULL story at link.