By Alan Amling
Editor’s note: The dust has barely settled on the tentative five-year contract reached Tuesday by UPS Inc. and the Teamsters union. There is no shortage of opinions. One of the more informed is that of Alan Amling, who spent 27 years at UPS, retiring in 2019 as vice president of corporate strategy. Today, Amling (pictured) is an assistant professor of practice at the University of Tennessee’s Haslam School of Business. Below are Amling’s five takeaways from the tentative agreement between UPS and the Teamsters union. These originally appeared on LinkedIn and have been edited to conform with FreightWaves’ style.
1. There is a clear winner, and it’s not UPS or the Teamsters, it’s the US economy
Anderson Economic Group, which calculates the economic impact of labor actions, estimated the impact of a 10-day strike, which was not expected to be long in duration had a work stoppage occurred, at $7 billion. The first and only UPS strike in 1997 lasted 15 days. Given the strong growth in parcel demand due to e-commerce, which barely existed in 1997, the cost to the economy would have been exponential had this work stoppage lasted longer than 10 days.
UPS will try to pass on much of the increase in costs to shippers and consumers. That will be inflationary. But a settlement is not nearly as inflationary as a strike where demand would outstrip capacity in the parcel market.
2. For the Teamsters, it was ‘mission accomplished’ but …
The Teamsters checked all its boxes and came away with a strong contract it can leverage to organize Amazon.com Inc. warehouse workers. The Teamster rank and file will likely approve this.
Current UPS Teamsters will benefit from this agreement, but few new Teamster jobs will be added. Nonetheless, this agreement will add momentum to union popularity, which already is at its highest approval rating since 1965.
Teamster General President Sean O’Brien said UPS (NYSE: UPS) put in “30 billion of new money.” I’m estimating about $20 billion in new operating expenses on the high side over five years, which is significant. That’s a 35% increase over five years, or about 6% per year.
3. UPS is signaling an acceleration of its ‘better not bigger’ strategy with this agreement
The most telling part of the agreement was UPS’ commitment to only add 30,000 Teamster jobs (7,500 new full-time jobs and filling 22,500 open positions) over the next five years. That is an increase of less than 2% per year. In the previous five years, UPS added 100,000 Teamster jobs, or 7% per year.
Look for UPS to lean into B2B and away from B2C. If UPS wanted to be a leader in e-commerce shipping, it would have fought harder to increase its use of contractors and gig workers. The agreement gives union members the right of first refusal to use personal delivery vehicles during seasonal periods.
As wages rise, the relative cost of technology decreases. Look for UPS to aggressively add automation and robotics to increase efficiency.
4. FedEx, the U.S. Postal Service and regional carriers will benefit
If UPS tries to raise rates in line with its cost increase, lower-cost rivals can match the increase to boost their profits. Alternatively, they can leverage their lower-cost networks with smaller rate increases to take share.
There are risks to FedEx Corp., (NYSE: FDX) UPS’ chief rival. The pay disparity with UPS drivers and warehouse workers will widen. This may fuel resentment on the part of FedEx contractors and drivers and challenge the FedEx Ground independent contractor classification. It may also put into question why FedEx and UPS are governed under different labor laws. FedEx is under the Railway Labor Act, and UPS is governed by the National Labor Relations Act, under which it is easier to unionize and to take self-help actions such as a work stoppage.
5. The big 3 e-commerce retailers will get bigger
Amazon Logistics (NASDAQ:AMZN) already delivers more parcels per year in the U.S. than FedEx and will pass UPS over the next year as UPS continues to shed low-value e-commerce volume, including that of Amazon, UPS’ largest individual customer.
Ship from store and buy online pickup in store (BOPIS) will become even more attractive. Small to midsize shippers and rural businesses and consumers will see the largest increase in shipping costs and should look hard at bundling shipments in multiple geographies to lower overall costs.
Linda Kindel
All Drivers Deserve A Big Reise114 Degrees.While All You Suits Sit On Your BUTTS In A C.
Stephen Culley
He got a couple of things correct. Yes the general public did not have to put up with a Strike.
Sean Obrien came away with a solid contract.
Fed Ex started as an airline that is why they aren’t part of the NLRB. Nothing in this negotiation changes that. Nothing about this contract was different then any of the others since Fed Ex started their ground service. The Teamsters have never made being part of a Union attractive to Fed Ex or Amazon employees.
He is correct that UPS will pass on the cost to the customers and it will give Fed Ex a cost advantage, however UPS has always been good in calculating cost. If they can absorb some of the $20 to $30B with production gains automation or management adjustments it will be a successful contract. If they can’t the next contract will be reduced.
The big gainers were the part timers. It’s the first contract that the Union acknowledged their contributions. If that helps with retention a sizeable piece of the $20B will be taken care of.
As for the 22.3 jobs go that is a looser on both sides. UPS struggles to fill those positions as is increasing the number is just foolish. They are not cost effective and the current Union members don’t want them. That is why so many of them are not filled.
Fed Up driver
Voting no.
O’Brien over promised, and under delivered.
Air conditioning: I might see it at the end of my career, maybe.
Article 18, section 27 Designate one or more employees per shift who are ALLOWED to call emergency services. Other employees are allowed to call 911 if the designated employees are unavailable. We’ve had drivers admitted to the hospital for complications steming from heat stroke. Several managers (plural) refused to drive them to the hospital, or call an ambulance.
Donald Dean
Voting it down. O Brian is worst than Hoffa. Now that’s saying alot
Stephen Webster
FedEx contractors and Amazon contractors and Amazon workers need to plan a major Labor action otherwise the turnover rates will jump and both FedEx and Amazon will have a shortage of good contractors. This means every part time job at U P S will have at least 20 applications. The FedEx gov should impose min standards of health and safety and wage of at least 3.5 times the rent for distribution center wages based on a 40 hour week
Feeder Driver
Voting it down. Not a good contract. Funny how people on the outside can’t see the writing on the inside walls.