UPS plans to operate Overnite as subsidiary UPS plans to operate Overnite as subsidiary

UPS plans to operate Overnite as subsidiary

UPS plans to operate Overnite as subsidiary

UPS plans to operate Overnite as subsidiary

UPS plans to operate Overnite as subsidiary

   UPS officials ruled out any possibility on Monday that the acquisition of Overnite Corp. might involve integrating the operations of the heavy freight motor carrier and the company’s small package network, saying Overnite would function as a standalone subsidiary.

   Overnite’s management team, lead by Chairman and CEO Leo Suggs, will stay in place and run the company.

   Overnite, the fifth-largest U.S. trucking company in terms of revenue,    will continue to reports its finances separately and there will be no consolidation of drivers, facilities or equipment, UPS spokesman Norman Black said.

   UPS announced its intent Monday to buy the motor carrier holding company, and its Overnite Transportation and Motor Cargo operating companies, for $1.25 billion. Richmond, Va.-based Overnite is the former national trucking subsidiary of railroad holding company Union Pacific Corp. that was spun off in November 2003. Overnite Transportation operates in all 50 states, Guam and the U.S. Virgin Islands. Motor Cargo is a regional LTL that primarily serves the western part of the country. Both companies also serve Canada and Mexico.

   When UPS bought Menlo Worldwide Forwarding six months ago to bolster its heavy freight air service offerings the company integrated part of Menlo’s operations by using unused capacity on UPS aircraft while keeping sorting facilities separate.

   But the small package and heavy freight ground networks are too different to treat interchangeably.

   “The very nature of the business are so different that there is no meshing,” Black said.

   That means that there are few potential areas for UPS to undertake cost-cutting measures. Overnite is UPS’s first foray into the less-than-truckload industry and without an existing ground freight company there is little consolidation to be done.

   Officials at both companies stressed the friendly takeover will help Overnite, a $1.6 billion company, grow even faster.

   “We’re quite confident and comfortable that we have a new subsidiary here that can grow very aggressively in this business backed by our financial resources,” Black said.

   “We pick up 3,500 UPS salesmen” when the deal closes later this year, Rosenfeld said. “If each of those salesmen come up with two shipments per day, Overnite’s business grows 20 percent in a year.”

   Overnite has a full menu of services, including guaranteed overnight, next-day and two-day products that more trucking companies are trying to offer to meet customer demand for time-definite deliveries, regional, inter-regional, long-haul and    cross-border coverage, assembly and distribution, and specialized transport for trade show and government customers.

   Overnite also has a dedicated truckload division that handles shipments above 10,000 pounds and accounts for 10 to 12 percent of the company’s revenues, Rosenfeld said.

   UPS has appointed an integration team, but no decisions have been made yet whether Overnite will be rebranded in UPS colors, Black said. In the past, UPS has quickly changed over other companies because it wants customers to see it as a single company offering integrated transport and logistics services.

   FedEx, UPS's main rival in the domestic express and ground shipment industry, has seen its LTL division, FedEx Freight, rapidly grow in volume and revenue the last couple of years along with the economy. FedEx built its trucking business by acquiring two regional trucking companies a few years ago.

   At last week’s Bear Stearns conference in New York for transportation sector investors, John Mullen, the Deutsche Post World Net board member responsible for the DHL express and logistics operations in North and South America, expressed interest in having a less-than-truckload capability in the U.S. market, but said DHL is preoccupied building out its small package ground network after its 2003 acquisition of Airborne Express.

   “We see the synergies from an LTL network, but right now we have more on our hands” than we can deal with, Mullen said.

      A key question surrounding the deal is whether the Teamsters union, which represents UPS drivers, will seek to organize Overnite drivers again. Overnite fought a bitter battle in the 1990s to keep the union out of its terminals. Overnite’s other major competitors in the LTL business, Yellow Roadway Corp. and ABF Freight Systems, are unionized.

   The Teamsters tried to organized Overnite’s workers on a city-by-city basis. At one point about 12 percent of Overnite’s workers at 26 terminals were organized. The union and the company were never able to reach a contract, so the Teamsters called a strike in October 1999. During the standoff, both sides accused each other of bribes, violence and destruction. The union claimed Overnite refused to recognize the union and negotiate and it punished and fired workers who favored the union. The Teamsters ended their three-year strike in October 2002.

   The few local Teamster units that existed have since decertified and the company is completely union free, Rosenfeld said.

   Once Overnite becomes part of a company that has a union presence it’s possible that the Teamsters will come knocking again, said Satish Jindel, who heads Pittsburgh-based SJ Consulting Group.

   “They have an overlap of business they handle,” Jindel said, referring to UPS hundredweight product, which tried to capture the small end of the LTL market by moving shipments of 100 pounds or less on UPS package trucks. “The Teamsters could make a case that you are taking multiple piece shipments from my guys and giving it to the non-union guys.”

   In a statement Monday, Teamsters President James P. Hoffa said the union will monitor the Overnite acquisition to make sure UPS drivers do not lose jobs.

   “Significant numbers of Overnite workers have repeatedly voted in favor of Teamsters representation, but their democratic aspirations were ignored by their company, which refused to recognize the union and bargain in good faith,” Hoffa said. “We are hopeful that UPS’s long history as a company with Teamster representation will create new opportunities for Overnite workers to achieve their goals in the workplace.”