Monday, July 22, 2024

UPS, Teamsters expected to ink deal no later than June 30

A leading parcel industry consultant said Tuesday that he expects a contract agreement between UPS Inc. and the Teamsters union to be reached no later than June 30.

The comments from Satish Jindel, president of Ship Matrix Inc., are the first from any consultant to go as far as forecasting a time frame for averting what could be a potentially devastating walkout by 350,000 UPS-employed Teamsters. Jindel has also gone on record as saying there is no chance there will be a strike.

In a follow-up email, Jindel said he does not have inside information on the status of the negotiations. Instead, his views are based on having lived through many contract cycles and knowing the “current market dynamics to connect the dots and make a very credible forecast.” UPS-Teamsters contracts typically have five-year durations.

Jindel was the first to report last year that Frederick W. Smith, founder of FedEx Corp., would step down as CEO after 50 years in favor of Raj Subramaniam. Jindel issued his predictions to FreightWaves before FedEx published an official statement announcing the executive transition.

Jindel’s comments about the UPS-Teamsters talks square with those made by UPS CEO Carol B. Tomé, who has said she expects a deal to be reached fairly well before the contract’s expiration date. Tomé has said that the talks would start later than usual and that the rhetoric would be noisy. However, both sides are a lot closer on key issues than the public recognizes, she has said.

The current contract expires July 31. Teamsters General-President Sean O’Brien has repeatedly warned that UPS workers will strike on Aug. 1 if a deal isn’t reached by the end of day July 31.

Because UPS delivers more than 20 million parcels a day, a walkout could be extremely disruptive to the nation’s delivery infrastructure. However, the industry has multiple nonunion carriers such as FedEx Ground, FedEx’s (NYSE: FDX) ground-delivery unit, regional delivery carriers and retailers operating their own delivery networks that could pick up the slack to some extent. 

In addition, the U.S. Postal Service only utilizes about half of its 60 million parcel-delivery capacity, based on ShipMatrix data. 

Another factor weighing against a strike is that the summer months are not peak delivery periods, and with volumes flattening in general due to demand weakness, it will be much easier for UPS shippers to find other options at this time of the year.

A Teamsters strike would be “painful but not catastrophic,” said Josh Taylor, director of professional services at consultancy Shipware LLC and a former UPS executive.

That said, no one is preaching that shippers wait too long into the spring to secure alternate capacity, especially if they need a lot of it.

Most analysts, including Jindel, believe that in the current market environment, the stakes are too high and everyone has too much to lose for the Teamsters to strike. It is almost a given that the union will receive a significant wage bump since much has changed with wage inflation since the current agreement was reached in 2018. 

Much may hinge on how much the union is willing to bend on work-rule changes in return for higher compensation, analysts have said.

UPS declined comment, while the Teamsters were immediately available to comment.

The post UPS, Teamsters expected to ink deal no later than June 30 appeared first on FreightWaves.

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