March 26, 2013

Teamsters float contract outline to UPS as talks race to meet unofficial March-end deadline

Investment firm says UPS shippers ready to move to FedEx next month.

By Mark B. Solomon

The Teamsters Union over the weekend disclosed for the first time the broad strokes of a contract proposal made to UPS Inc., as the company races to ink a tentative pact with the union by month's end to avoid possible shipper defections to rival FedEx Corp.

Ken Hall, director of the union's package division, outlined the Teamsters proposal, which calls for a five-year contract, in a national conference call Saturday with UPS shop stewards. All UPS Teamsters would receive a $1-per-hour wage increase in each year of the contract and a $1.50-per-hour annual increase from current levels to cover pension and health benefits. The current contract, signed in 2007, calls for a $1 an hour annual increase in the company's contribution benefits.

The union proposal also calls for the creation of an undefined number of so-called "22.3 jobs" in each year of the contract. Those jobs are named after the article in the 1997 agreement reached after the Teamsters shut down UPS that summer with a 15-day strike. The language of the article required the company to create 20,000 full-time jobs between 1998 and 2008 by combining part-time positions into full-time work. The Teamsters, and in particular the dissident group Teamsters for a Democratic Union (TDU), have said UPS has not done all that it could to create that many full-time positions.

The proposal would increase the starting pay for part-timers to $15 an hour from the current $8.50 an hour. The union will not accept any contract offer calling for active members to pay premiums on their health insurance.

The contents of Hall's proposal were contained in a communiqué by TDU issued soon after the conference call ended.

TDU said in the communiqué that Hall reviewed a "series of tentative agreements" relating to the company's "SurePost" program with the U.S. Postal Service (USPS). Under the program, UPS transports packages—mostly merchandise ordered online—deep into the USPS physical network, where it is delivered the "last mile" to the final destination by letter carrier. The program is offered at low cost to retailers and e-tailers and has been a successful revenue-generator. However, the Teamsters have long complained that SurePost takes business away from UPS drivers.

One of the proposals, according to TDU, would require that all SurePost parcels weighing more than 10 pounds or wider than 3 feet would be delivered by a UPS driver. Hall said a program called "SurePost Redirect," where UPS uses technology to reroute SurePost packages to the UPS system and away from the Post Office, has resulted in 20 percent of all SurePost shipments moved by UPS drivers.

UPS did not return a request for comment. The Teamsters declined to comment on Hall's proposal or even confirm that he had made one. It is believed UPS is seeking a seven-year contract, which the union does not favor.

The current agreement expires at the end of July, and both sides have been negotiating on and off since September with the goal of announcing a tentative agreement by the end of March. In its weekly "Friday Freight" column published March 22, investment firm Wolfe Trahan said it was told by an unidentified Teamster source that it's unlikely a tentative deal will be struck by the end of March due to the complications surrounding the health care discussions. However, the contact expressed confidence that a deal will get done long before July.

The firm also said it's been told by some shippers they would accelerate shifts in volumes to FedEx starting next month if a tentative deal isn't reached by March 31. Ed Wolfe, a long-time transport analyst and co-founder of the firm, surmised that diversion is already occurring. Wolfe noted that FedEx reported a 15-percent year-over-year increase in ground volumes in its fiscal third quarter that ended in February. That compares to year-over-year gains of 11 and 8 percent, respectively, in the prior two fiscal quarters, he said.

The volume figures include shipments generated by FedEx's own initiative with the USPS, called "SmartPost."

A FedEx spokeswoman declined comment.

More articles by Mark B. Solomon

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