> People will blame unions because the company had to fund pensions and health insurance. It likely will come back as a private company with lower pay, worse benefits, and maybe if people are lucky a 401k.

You can never compete if you have a pension liability from workers no longer there. A competitor can always come in without that liability and out compete you. It's not good for the business or the employees who will get screwed 30 years later. Why is this such a hard lesson to learn?

From the article:

"Experts in the field said it was primarily an unaffordable amount of debt, more than the cost of the union contract, that did in Yellow.

'The Teamsters had made a series of painful concessions that brought them close to wage parity with nonunion carriers,' said Tom Nightingale, CEO of AFS Logistics, a third-party logistics firm that places about $11 billion worth of freight annually with different trucking companies on behalf of shippers. He said the company began taking on significant amount of debt 20 years ago in order to acquire other trucking companies."

Sounds like it was just bad business strategy.

Exactly why you should be against defined benefit pensions and other policies unions often push that favor workers no longer there

Or exactly why they shouldn't take on a ton of debt acquiring companies when it's not beneficial?

You can easily compete if you have a pension liability from workers no longer there by making provision for it at the time that the liability is created.

You can't really provision a defined benefit 30 years from now. And i def wouldn't trust you to. Not only that you have to ensure that no one else comes along in the next thirty years and messes with it, or the company tanks or a million other things that could go wrong

If you provision it you might as well give me a 401k where I have discretion over the funds. Or give me money I can use for my own healthcare in the future.

The only people defined pension benefits is shady business managers that don't care and want to get away with cheaper labor costs at the expense of the future which he won't be around to see anyway

Can you? A defined benefit plan is ultimately involving someone taking a risk. One either makes the risk very small, and therefore being a very expensive benefit from the very beginning, or be aggressive, and risk being an underfunded benefit.

Either way you slice it, someone providing defined contributions instead is far safer, and can safely outcompete the defined benefit company, as they aren't taking on either side of the risk: The employee is.

Note that the costs of trucking are the same either way: Paying for the contribution later is precisely a way to be very competitive now, as the idea of a safe, defined pension that you self fund is much nicer until you see what it takes out of your paycheck.

> Can you? A defined benefit plan is ultimately involving someone taking a risk.

Yup. No less than Warren Buffett, who spent literally his entire career performing risk analyses, could figure out a way to manage defined benefit plan risk, and stated as such in a (now famous) memo in the late 60s or early 70s.

Couple that with the number of pension defaults and pension haircuts that have occurred and are likely to continue to occur and 401(k) plans look a lot more attractive, both to the employer and to the employee.

The memo in question:

https://davidcoveney.com/wp-content/uploads/2019/12/16030128...

It helps a LOT if you also have an investing genius giving you tips on how to allocate the plan assets!

In theory it's possible to make defined benefit pension programs work. In practice they almost always eventually fall apart. The risk is large as to make them essentially financial malpractice.

Defined contribution plans such as 401(k) are much safer for workers and taxpayers.

Pensions seem like an outdated concept, when 401Ks and IRAs are options. Pensions are essentially a tradeoff of lower pay now in exchange for benefits in the future, with a sprinkle of an incentive for increased retention added in, but with the critical downside (to the employer) of it basically being an unbounded, undefined financial downside for them at the tail end.

Employers should pay people, contribute to their retirement funds if further tax-advantaged incentives are needed (and society can and should have further discussions on how complicated these tax laws are), but people should own and be in charge of their own retirement funds.

My counterargument to this is:

Pension/retirement arrangements where the contributions are defined but the benefits are not are a risk to the individual -- you have to figure out "how much do I want to invest, what do I think the market will do, where should I put the money?", and if you get it wrong you don't have enough money in retirement. For the company, on the other hand, they're very low risk, because the amount of the company's liability is clearly defined and limited up front.

Arrangements where the benefits are defined are not a risk to the individual (who knows how much they will get, and will get it regardless of market conditions over the next few decades); instead they're a risk to the company/government/etc that provides them (if they set the defined final pension too high and investments don't go so well then it costs the company more than they expected).

In general my preference is that (as a society) we should prefer to impose risks not on individuals but on large organizations who can afford to employ people who take the time to assess those risks and make the necessary decisions, and who have the resources and timescales to be able to weather unexpected downturns. So I think defined-benefit is better than defined-contribution.

(This is of course entirely not the way the pension setup has gone, at least in the UK -- defined-benefit is getting rarer and rarer, and defined-contribution is pretty much the standard for the private sector these days. But I think it's an unfortunate trend.)

> if they set the defined final pension too high and investments don't go so well then it costs the company more than they expected

Like the whole company? Only a government that can print money can really offer such a defined benefit, and even then it is just a mirage since the actual value can be inflated away. The real issue is that it is actually impossible to make such guarantees since conditions can always change, but some people don't want to accept that reality.

> Pension/retirement arrangements where the contributions are defined but the benefits are not are a risk to the individual ... and if you get it wrong you don't have enough money in retirement.

I think this is slightly overstated. The most common outcome in this situation is that you work more, the amount of extra work being determined by the size of the error.

> In general my preference is that (as a society) we should prefer to impose risks not on individuals but on large organizations who can afford to employ people who take the time to assess those risks and make the necessary decisions, and who have the resources and timescales to be able to weather unexpected downturns. So I think defined-benefit is better than defined-contribution.

This isn’t a bad point, and is strengthened by the observation that pensions benefit from pooled risk. E.g. those that live longer are subsidized by those who unluckily die younger, so everyone on average gets away with slightly lesser contributions (or earlier retirements).

But it misses out on incentive mismatches with pensions. A pension administrator is probably not going to work at the company in question for their whole career, and their incentive career wise is probably not the long term maximization of risk adjusted return for this pension, but instead perhaps taking risky bets hoping they pay off for notoriety, or avoiding risk at all costs to avoid complaints.

And this dovetails into some really hairy aspects of pensions that aren’t often brought up.

For one, they generally punish people for alternative lifestyles. Imagine trying to be a childless person retiring early with a pension that doesn’t kick in until 65 because the typical person has kids and works that long.

Also, pensions can be discriminatory. Imagine having a disease that shortens your lifespan, like MS, or a higher risk factor for something like early onset dementia. It’s entirely possible you’re forced to contribute to a pension program you have every likelihood of not being able to benefit from in your natural lifespan.

For a more common example, women live longer than men. Should men have to contribute less for the same benefits then?

Defined benefit pension plans are actually more risky for workers because most companies eventually fail. This is counterparty risk.

Regardless of how you feel about pensions, tying them to the employer is silly because it limits employee mobility and is a liability most businesses don't want to deal with. What's ironic is the people promoting them tend to be the same as the ones promoting nationalized healthcare (or vice versa).

In some industries low worker mobility is very desirable for the company. Offering long time horizon benefits is a good way to reduce turnover. I would prefer my local nuclear plant operator to have employees that stick around and get to know the equipment very well.

Then pay them significantly more than they can get at their next job.

A pension would be a form of that.

Exactly. Pensions might have been practical back in the day when people worked for "the company" for their whole career. But when so many change jobs every 5 years or less, they make no sense.

Union pensions are typically paid into by companies, but the pension is maintained by the union. Teamsters, IBEWs, etc pensions operate in this manner. You won't work for the same company your entire career, but you're likely to remain in the same field for it.

Pensions work just the same as 401ks, but better when properly funded and governed, because your average worker is unsophisticated as it relates to investing. 401ks were a scam foisted on the public as pension replacements, with corporations instead juicing shareholder returns with what was previously pension contributions. If you're a high earner without any life events that would cause you to liquidate your 401k (extended job loss, medical event), congrats! You have won the lottery.

https://www.nbcnews.com/business/retirement/great-401-k-expe...

https://www.economicpolicyresearch.org/images/docs/research/...

https://www.gao.gov/financial-security-older-americans

https://web.archive.org/web/20201026175751/https://www.gao.g...

https://www.empower.com/the-currency/life/average-401k-balan... (direct your attention to median balances)

Union pensions were a scam foisted on workers by corrupt union leaders who wanted access to a huge pot of money.

https://www.ojp.gov/ncjrs/virtual-library/abstracts/invisibl...

https://www.dea.gov/sites/default/files/pubs/states/newsrel/...

I would much rather have my retirement funds in a 401(k). The assets are in my name and can't be arbitrarily taken away.

Not every company is a tech company and not every worker is in their 20's. If you're a truck driver there's a good chance you do work for the same company for your entire career.

You've got to be kidding. Trucking has very high employee turnover. Drivers will jump quickly to a competitor that offers slightly higher wages or better scheduling.

> when so many change jobs every 5 years or less

That wording implies voluntary.

The new loyalty relationship is immensely asymmetric: "the company" holds you by the heart plug (health plan, visa, vesting) while at the same time will boot out a substantial fraction of its workforce, regardless of merit, the moment a quarter turns yellow in some spreadsheet or the M+A pendulum comes around again.

There are very few places anyone can spend their whole career at one company even if they wanted to. I've been at this 30 years and I think I've had 10 jobs but only quit once.

401k and IRA were created in a system that included pensions. Now without them, we have a huge shift towards a volatile market with a lot less guarantees, and lower limits. This isn’t a good system we have. Most are ill prepared.

The guarantees provided by the PBGC are very limited and create a terrible moral hazard. Defined contribution plans such as 401(k) are much safer because the assets are in individual named accounts which aren't at risk if the employer or plan sponsor goes bankrupt. Most such plans allow employees to invest in risk-free assets such as Treasuries if they desire.

You know this is market right? They can't just charge whatever they want. If their service is worse than competitors and they are unable to make it better they need to undercut the competition. Sometimes businesses fail, that doesn't necessarily mean the strategy was bad, could've just been bad execution.

> Taxpayers ended up holding 30% of this company's stock

Is that really surprising though? Getting a government buy-in like this generally happens after private sector investment falls through. If large swathes of the private sector didn't believe that the company would become profitable after infusion (they would have bought low and sold high if they did), why would public sector capital have any different outcome?

"Lo barato sale caro" which translates to the "the cheap becomes expensive". If you see something that is cheaper then everything else, just assume they're cutting corners in places that matter. It will be interesting to see how many millions of dollars they use to keep the executive team in place during the bankruptcy despite the fact it's their decisions that lead to failure. I also wonder how much student debt we could have cancelled for 700M, it would have been a better investment.

> "Lo barato sale caro" which translates to the "the cheap becomes expensive"

99% true with some very few exceptions. I remember Evan Davis' on a BBC podcast called "The Bottom Line". In said podcast he was interviewing various business people.

One of them was the CEO of Primark.

Over 'here' (in Europe - in multiple countries) you can see MASSIVE stores (I haven't yet been on a Primark store that was smaller than a football pit (per floor - typically two floors - lower for women, upper for men and kids), and they have shockingly low prices. I haven't visited a Primark outside Europe yet, so I have no opinion about other regions.

So.. back to the CEO.. he was responding that their low prices is not because of low quality, but because they never spend a dime on marketing, and thus they can use these savings to improve quality and lower prices, and then went on to challenge the journalist to remember/find one (paid) advertisement.

At that point (5? 6? 7? years ago) I also tried and for the life of me I could not remember ever seeing ads on the Tube (London underground), newspapers, bus stops, internet (but I block 99.9% of them).. anywhere.

So yes, 99% true but then I have a black long-sleeve t-shirt Cedarwood (Primark product) that 5 years on is still in great shape and I do wear it a lot, while the respective H&M don't go past the 2 year mark.

Sounds like Walmart in the US. They're able to achieve their prices by robbing the employees of a livable wage.

If you look online, Primark continues to engage in this illegal behavior after getting caught on numerous occasions, just like Walmart.

https://www.business-humanrights.org/en/latest-news/minimum-....

https://www.theguardian.com/global-development/2021/jul/02/w...

> The answer is to charge what it costs you to deliver plus a profit. If you can't compete directly on price make up for it in service and reputation.

I'm guessing the cause is more complicated than them just not knowing they should make a profit. If I'm wrong, write them a letter with this advice, there may still be time to save the company.

This works in a vacuum, but in many industries you get undercharging and living off investments, be it Uber or a gajillion startups, many of them mentioned here on HN.

Fair enough, but...trucking? Isn't that kind of an established market?

That's why we have "financial innovation". Which in this case boiled down to using investment money to buy up competitors, with the benefit of scale (and monopoly pricing) to come later. And then the benefit doesn't come ...

Ok, in the case of Uber it's undercharging and living off investments (from investors who hopefully know what they're doing), in the case of this 99-year old company it's undercharging and living off federal bailout packages (paid by the taxpayer). I would say that's a bit different...

Why are industries dominated by large unprofitable companies? I was told the way to succeed was to offer goods and services that people want, make a profit and grow the company; this was a key benefit of the free market and ensured consumers had access to many good choices and it was all stable and sustainable. Instead unprofitable companies dominate, not because they succeeded in the market, but because they received favor from the wealthy.

I'd like an economic system where the companies that offer the best goods and service at the right price grow and succeed. I've heard this is how capitalism is supposed to work, but more and more it seems the key to success is currying favor with the wealthy and capturing a market through external means.

>Why are industries dominated by large unprofitable companies?

The logic is quite simple: by undercutting your competition, you aim to quickly drive others out of business and secure a monopoly. Once in such a position, making a profit becomes much easier.

Every time I think about this I keep coming back to anti-trust enforcement, we need more of it. And perhaps a single entity having enough money to essentially buy an entire industry isn't a good thing.

The problem is, that the thing that's happening is shirt-term good for the users, and people don't want any government action until it's too late.

If i start offering $5 oil changes (oil included, price difference covered by VC money), that's good for the consumer... then all the other shops close down, but consumers still get the $5 oil changes... then I hike the price, and only then people start to complain. And if you close me then, who will change your oil?

Imagine government banning google for offering free email and killing most of the competition back then... people would complain, a gigabyte was a HUGE amount of space for then, and all that for free!

>Why are industries dominated by large unprofitable companies?

In general, they arent and companies that remain unprofitable dont stick around in the long term.

You also need to be aware that there are different ways to calculate profitability, so not all of the headline losses mean what you might think.

> people will blame unions

I think if you join a Union and demand unreasonable benefits for the skill required for a profession, then you’re responsible for the company’s collapse too.

I don’t think I could drive a big rig, it is a skilled labor profession; so what I’m not saying is ‘anyone could do that job’, but it is a job that can be trained for in a shorter amount of time than say an xray tech in a hospital.

What blows my mind is Unions in the USA often bite hard on the hand that feeds them, when it doesn’t need to be this way. The Union should work with the board to improve profits. Why there isn’ta symbiotic relationship is so strange.