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By Satish Jindel
With Teamsters workers at UPS Inc. believing a work stoppage has to occur to yield better wages, benefits and working conditions, I am compelled to share some facts.
Having lived through a few contracts prior to the 1997 Teamsters strike of (NYSE: UPS), and several since then, I hope the union membership does not cut off its nose to spite its face.
For many current UPS/Teamsters union workers, the 15-day work stoppage in August 1997 occurred prior to their joining UPS. Many if not all current-day workers lack knowledge of the parcel industry dynamics crucial in evaluating whether a strike in 2023 would be in their interest or be extremely detrimental.
The 1997 strike was the only one in the 100-year relationship between the Teamsters and UPS. It was bad for all stakeholders: shippers and their customers, Teamsters union workers, UPS shareholders and management, and others.
While most competitors benefited, the biggest winners were FedEx Corp. (NYSE: FDX) and Roadway Package System. I have personal knowledge of how the Teamsters strike helped FedEx buy RPS in October 1997. While the two had initiated discussions in February 1997, the deal was called off in April as FedEx was unable to justify the price.
Then came the Teamsters strike in August, which diverted millions of express parcels to FedEx and ground parcels to RPS. It gave a huge boost to their respective stock prices, which allowed FedEx to justify the asking price for the deal to be announced in October.
Teamsters members would not have gone on strike if they had had any idea that it would help two smaller competitors become a much bigger and stronger one, which helped FedEx Express and Ground generate $50 billion compared to UPS’s $64 billion in U.S. domestic revenue in 2022.
With the express volume having shrunk over the past two decades, separately, FedEx and RPS would have been handling fewer express and ground parcels respectively today. The difference would have resulted in extra millions of parcels for UPS, which would have added thousands of unionized full-time drivers and package handler jobs.
To believe that today’s parcel market is the same as that of 1997 is analogous to people using AT&T coin-operated pay phones at a street corner in 2023 instead of cell phones.
In 1997, the entire U.S. domestic market size was 16 million parcels per day with market share distributed as follows: UPS at 70%, FedEx at 12%, RPS at 8% and rest with the U.S. Postal Service and a few small regional carriers. Since UPS’ daily volume of 11 million was too much for all competitors to handle and keep, about 90% of that diverted volume came back after the strike was over.
However, in the past 25 years, the parcel market has experienced massive growth partly driven by free shipping of online orders (led by Amazon) and then the COVID-19-related retailer store closures and the federal government handout of a few trillion dollars, such that the industry delivered over 75 million parcels per day in 2022.
Such rapid growth has supported a lot of investment in capacity expansion at FedEx and the Postal Service, as well as the startup of private fleets by Amazon.com Inc. (NASDAQ: AMZN), Walmart Inc. (NYSE: WMT), Target Corp. (NYSE: TGT) and others. Then there are consolidators like DHL and regional carriers like OnTrac that are hoping for a strike to permanently take market share from UPS.
According to the U.S. Census Bureau, e-commerce growth that expanded from 11.9% of all U.S. retail sales in early 2020 to 16.4% in the latter part of 2020 has now receded to 14.7% as consumers are returning to stores.
So, in 2023, the industry is faced with much more capacity than demand. The figures for the largest two direct alternatives to UPS are as follows: FedEx has capacity for 17.5 million parcels per day while handling 12.5 million; the Postal Service has capacity for 60 million parcels per day while it is handling just 28 million. Thus, between the two of them, there is excess capacity of 37 million parcels per day.
So, if UPS is currently delivering 21 million per day in the U.S., just FedEx and the Postal Service have capacity to absorb the entire UPS volume that gets diverted from a strike. In addition, Amazon delivered 13 million parcels per day in 2022 using its DSP drivers. And as it looks to cut costs for its private fleet for its middle- and last-mile services, it will be ready to handle UPS’ volume just as it tested such door-to-door service prior to the pandemic.
A strike at UPS will be timely for Amazon to enter door-to-door service for non-Amazon online orders. In addition to UPS permanently losing most of the Amazon volume that currently represents 11% of UPS revenue, Amazon will have found a way to bring most of that in-house and become a permanent parcel carrier competitor to UPS.
Walmart and Target have their own private fleets using employees and part-time gig drivers using their privately owned vehicles. A strike at UPS would give reasons for both shippers to expand their private fleets for last-mile deliveries.
If the 340,000 Teamsters union members stop working at UPS this summer, the future of Teamsters membership at UPS will look a lot different than it did in 1997. Instead of regaining 90% of parcel volume as it did after the 1997 strike, it may regain only 70% of the current volume. This time, the competitors may only accept UPS parcels if the customers commit to long-term contracts or agree to pay penalties for going back to UPS. A potential loss of 30% of daily volume would mean several thousand fewer drivers and package handler jobs at UPS.
So, while a Teamsters strike at UPS would be very costly and disruptive for shippers and their customers, and financially damaging for shareholders, it would be many times more painful for UPS drivers and package handlers who get paid the highest wages and benefits in the parcel industry. In addition, since the 2018 contract, signed without work disruption, UPS has added over 70,000 new Teamsters-represented jobs.
Even if there is no strike but the contract execution is delayed, shippers will start to divert UPS parcels in June and July. And the volume that doesn’t return will result in parcel volume declines for UPS and the loss of hundreds of drivers and package handler jobs.
So, dear Teamsters union members, I hope you do not bite the hand that feeds you.
Satish Jindel is CEO of ShipMatrix, a consultancy.
Nick S
Teamsters represent the workers, UPS represents the company brand. If UPS doesn’t want to lose market share, they should give in to the workers demand, not the other way around. It’s their business, so they should worry about their competitors, revenue, and growth. This whole article is backwards.
James Hoffa
Well written and researched article. The problem as I see it is that SJ is writing this article with common sense. Something the Teamster Leadership and the vocal minority of the membership lacks today. There are no good outcomes here. A work stoppage will lead to market share loss, just as it did to the NMFA carriers in ‘94. If UPS is to avoid a stoppage, their costs will have to move in a big way which will continue to drive a competitive wedge between them and their competitors, which weren’t around in 97.
UPS management and employees have done a fantastic job getting them where they are today. Best wages and benefits in the industry and running circles around their competitors. They got there with the help from a Teamsters union that understood they shouldn’t kill the golden goose.
Calling UPS a “white collar crime syndicate” shows that the new Teamster leadership can’t see past their nose. And it shows they’re more interested in a fight than they are the long term future of the company and their members.
WOLFIE- J. Randy Vandergriff
Interesting article..as a 44 year union UPS employee…this article is definitely written by a non-union person.The fact that was left out of this article was..FEDEx and USPS are barely retaining enough employees just to deliver what they have now..increased volume during a UPS strike would just sit in warehouses or in trailers not processed due to not enough staff to get it done..and the other fact not mentioned was that Amazon treats their drivers bad and can’t keep staff either ..So as where the numbers in this article are accurate as to volume per day..no company can handle what UPS does on a daily basis..Buster Brown rules the domestic ground volume and always will..We wrote the book..and the relationship between the Teamsters and UPS will survive going forward
Charles M Cambria
Satish Jindel is a longtime corporate shill. This is simply propaganda for the company. Shameful shill Jindel.
Leo Percepied
While I agree with 99% of this editorial, the author should have omitted the last sentence. UPS is not “feeding” the Teamsters and the Teamsters is biting at UPS’ hand. A lot of good (and factual) information is overshadowed by implying UPS is in a superior position to the union.
That’s just not so. O’Brien can adjudicate his demand in the court of public opinion. But he’d better have some game when he sits down at the negotiating table. His job is not only to get the best result for his members but be a partner with management to make UPS stronger. And UPS must see itself in partnership too. The UPS/Teamster relationship has been mostly positive and mutually beneficial. Accent on “mutual”. And after negotiations end and the members vote, and a new contract is in place (which will certainly happen with or without a strike), the only thing that matters is both sides are ready to mutually move forward.
No, the Teamsters is not biting the hand that feeds them. They are an integral part of UPS. This isn’t 1997 — that was 100 years ago. The industry has changed and will continue to do so. I doubt there will be a strike. But if there is, both sides better understand the implications.
Gio
I was an UPS employee in 1997. At that time the strike was necessary to achieve many important objectives for the workers who participated in building UPS.
Today, UPS denigrates its employees through longer hours, heavier dispatch, part time working conditions and a failure of today’s union representing its members.
The objectives of this contract should be a C O.LA. on the retirement benefit for all retirees, following the contact with language improvements, definition of terms in the agreement and language on A.I., artificial intelligence.
The items won in the 97 contract are lost today under a weaker union. If Samuel Gompers were alive today, he would be disappointed on how far union representation has digressed.
Some of the benefits achieved from the 97 strike have been loss so members should ask themselves…What are we prepared to do. It should not be a strike because of an outdated Teamster Unoin attempting to reclaim what it one was but these negotiations should be for the overall of its employees with their physical and mental well being at its forefront
Creek Johnson
I remember when UPS was employee owned, and took pride in how we looked to the public. Package cars were clean, and the drivers were neat in appearance. Those things have changed. It costs the company too much money to pay someone to clean package cars, and now the drivers look like a Hatfield and McCoy reunion!
I know you think this has nothing to do with a possible strike but it does. UPS goes without paying tow truck services for pulling broke down package cars, and for other kinds of services rendered by individual businesses. They probably hold the money until it draws more interest in the bank before they pay the bill. Some people had to take them to court to get their money, and refuse to do anything for UPS again. All so they can fudge the numbers, and their greedy shareholders get their bonus checks.
If they do all this to people outside the company, what are they going to do to their hardworking employees?
All this Union president is trying to do is gain back some of the ground that James Hoffa Jr and his cronies gave away during his tenure in the company pocket. 27-year-man at UPS