UPS Tells Shippers to Prepare for Freight Strike

By Paul Ziobro
Nov. 1, 2018 2:37 p.m. ET
United Parcel Service Inc. (UPS -0.40%) is telling customers to make alternative shipping plans in case of a strike in its smaller freight division, where unionized workers are set to vote on the company’s final contract offer next week.

UPS Freight workers rejected a tentative contract last month and are voting on an updated offer from the company. A contract extension expires on Nov. 12, after which the 11,000 Teamsters members could go on strike. The Teamsters have already authorized a strike, which would be the first work stoppage at UPS since 1997.

UPS is already preparing for disruption. The company notified shippers that the last day for freight pickups is next Wednesday and that it can only guarantee ground freight shipments through next Thursday. The company aims to clear its network of all freight by the end of that week.

“Because we do not have a guarantee against a work stoppage, we cannot afford to put our customers’ volume at risk of being stranded in our system,” UPS spokesman Glenn Zaccara said.

UPS Freight is the company’s industrial trucking unit, which primarily handles shipments of heavier goods and bulk shipments that move on pallets, such as retail goods bound for stores. It is the fifth-largest operator in a sector called less-than-truckload, in which truckers combine shipments from different customers on the same truck, according to SJ Consulting Group Inc. The UPS division had $2.6 billion in revenue last year and controlled 5.3% of the less-than-truckload market in terms of shipments.

A work stoppage in that division would cause disruption in a trucking market where manufacturers and retailers are already grappling with tight capacity and higher shipping rates as the strong economy pushes more freight through logistics networks.

It would also force shippers to scramble to find other carriers to handle their shipments, likely at a higher price.

Still, a strike in that division would be far less severe for UPS—and the broader U.S. economy—than it would be in its small-package network, which represents 243,000 package-truck drivers, sorters and other workers who help deliver millions of packages daily to homes and businesses.

Those workers ratified their tentative bargaining agreement last month in controversial fashion. While more than 54% of votes cast rejected the small-package contract, the Teamsters said that turnout was too low to block the deal. Union rules require that a contract needs to be rejected by two-thirds of ballots when less than half of members cast a vote. Turnout was 44%.

UPS and the Teamsters are still negotiating some local supplemental agreements before finalizing that contract, which runs until mid-2023.

“Customers can remain confident UPS is ready to continue to serve its small-package customers throughout the holiday season and beyond,” Mr. Zaccara said.

The tentative freight contract was rejected by 62% of voters with about two-thirds of ballots cast. The union demands include tighter restrictions on subcontracting out work, higher wage increases and eliminating restrictions on qualifying for pension and vacation benefits.

UPS agreed to make changes to some demands, but the Teamsters negotiating committee said that the company “refused to address a number of key issues for our members.”

“This company made the decision to give a last, best and final offer and to stop taking freight,” the Teamsters said in a news release Thursday. “This could all have been resolved by the company addressing the key issues at the negotiating table.”

The company said in a statement, “UPS made an offer we believe should be ratified. It is an offer that rewards our employees with wages and benefits at the top of the industry and compensates them for their contributions to the success of the company.” Mr. Zaccara said UPS believes that the latest offer “should be ratified.”

—Jennifer Smith
contributed to this article.

Article by The Wall Steet Journal