UPS faces tough test

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United Parcel Service Inc. is caught in a quarrel between its workers and the leadership of the Teamsters union. This development is unnerving to corporate shippers and could hurt their holiday shipping business. They were supposed to settle most of their labor disputes in June, when a majority of their U.S. workers approved a new five-year national master contract. The contract included wage increases in addition to revised health and pension benefits. Unfortunately, UPS is still negotiating with many local bargaining units across the country with the aforementioned components of the contract. Furthermore, there is discussion over restricting overtime and wages for part-time workers.

Out of UPS’s 323,000 full and part-time domestic workers, the International Brotherhood of Teamsters represents about 249,000 of them. Of those Teamster members, about 235,000 of them are covered by the master contract. However, the contract cannot go into effect until 16 supplemental agreements are negotiated and approved.

Teamsters Local 89 is one of the dissatisfied groups who are a critical part of the organization due to their size and location. This group represents about 10,000 employees in Louisville, Kentucky who are employed by or work near UPS’s Worldport, a giant automated packaging hub that processes and sorts 1.6 million packages daily. Also, UPS has to negotiate a contract with the freight division after the first attempt was rejected in June.

Director of global media relations, Andy McGowan, said “it’s still business as usual at the shipper. The company and the Teamsters have agreed indefinite contract extensions as it resolves the outstanding issues. We continue to make progress.”

These unsettled labor disputes hurt business due to customer anxiety. Keith Byrd, co-founder of Transportation Impact LLC, which audits and negotiates on behalf of shippers, said, “any time there’s friction between hourly workers and management; it doesn’t sit well with customers. The more commotion and skepticism there is, the more customers will start worrying again.”

Companies in the business of corporate shipping are concerned by labor negotiations due to the possibly of potential slowdowns or interruptions that could delay their next shipment. In an earnings call with the Securities and Exchange Commission, the company reported that negotiations with the Teamsters ‘hindered volume growth’. This was following the revelation of volume growth that was slightly below expectations.

Much to the dismay of UPS, the Teamsters will continue to negotiate contracts indefinitely. A former executive stated that UPS believes this could leave an opening for FedEx to convince customers to switch services or spread risk. Moreover, the majority of FedEx workers are not a part of a union.

In : Business

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