After breaking off talks and being apart for nearly three weeks, UPS Inc. (NYSE: UPS) and the Teamsters union needed just three hours Tuesday to agree to a five year-contract that, if ratified by the union’s rank and file, would prevent a potentially crippling nationwide strike that could have started on Aug. 1.
Under the agreement, 7,500 full-time Teamsters jobs will be created and 22,500 open positions will be filled, according to a Teamsters statement. Existing full- and part-time workers will get $2.75 more per hour in 2023 and $7.50 more per hour over the length of the contract, according to the statement. Existing part-timers will be raised up to $21 per hour immediately. New part-timers would start at $21 per hour and advance to $23 per hour. The current national average floor for part-timers is $16 per hour.
Wage increases for full-timers will average $49 per hour at the top end of the scale.
General wage increases for part-time workers will be double the amount obtained in the previous contract, and existing part-time workers will receive a 48% average total wage increase over the next five years.
UPS Teamsters part-timers will have priority to perform all seasonal support work using their personal vehicles with a locked-in eight-hour guarantee, according to the statement. The issue of non-union drivers using personal vehicles to perform seasonal deliveries was a potential sticking point in the talks.
In separate statements, the Teamsters called the agreement “historic,” saying UPS has put $30 billion of new money on the table. UPS CEO Carol B. Tomé called the contract a “win-win-win agreement” on the issues important to all stakeholders.
General Secretary-Treasurer Fred Zuckerman said he’s never seen a national contract “level the playing field” as this one in his four decades as a union official. UPS CEO Carol B. Tomé called the contract a “win-win-win agreement” on the issues important to all stakeholders. UPS, in a required quiet period ahead of second-quarter earnings Aug. 8, just posted a brief statement confirming the agreement.
The contract will be submitted to 340,000 rank-and-file members next Monday for ratification. Voting is expected to conclude Aug. 22.
The contract also calls for in-cab air conditioners to be installed in all larger delivery vehicles, sprinter vans and package cars purchased after Jan. 1, 2024. All package cars get two fans and air induction vents installed in the cargo compartments to offset the sweltering heat.
All drivers classified as “22.4s” — so named after the language in the contract — would be reclassified immediately as Regular Package Car Drivers and placed into seniority. This would end a two-tier wage system the Teamsters have long charged was unfair to the 22.4 drivers. In addition, Martin Luther King Jr. Day will be a paid Teamsters holiday at UPS for the first time.
Bascome Majors, analyst for Susquehanna Investment Group, said his channel checks found that UPS and the Teamsters could negotiate 7 day a week service mid-contract without opening up the entire contract to do so. UPS does not operate on Sunday.
For a contract to take effect, the master agreement agreed to on Tuesday, as well as more than 40 local and regional supplemental agreements, must be ratified in straight up-and-down majority votes. The early betting is that the rank and file will ratify the master contract because the negotiating committee, which approved the deal unanimously, would not have done so unless it was sure it would be ratified.
At the same time, it’s doubtful UPS would have made a deal had it thought it would impede its ability to achieve profitable growth in the face of 4.5% annualized labor cost inflation that the contract would generate in years two through five. It has been estimated that labor cost inflation will come in at 7%-8% in year one, and then 4% to 5% for the remaining four years. There could be productivity offsets to these figures, but for now that is speculative.
Gordon Glazer, who manages the postal practice for consultancy Shipware LLC, called the contract a big win for labor. However, it will make it harder for UPS to compete, and they won’t be able to do it simply by raising rates, Glazer said. UPS will “need to be clever and shrewd” to make sure each deal adds to its bottom line, he said.
Once the dust settles, the big question for shippers is what the company‘s annual general rate increase (GRI) will look like for 2024. Tommy Storch, a transportation procurement expert at Insight Sourcing Group, expects at least an 8% increase in UPS’ GRI when fuel surcharges and accessorial fees — levies for services apart from the basic line-haul — are factored in. Rival FedEx Corp. will likely follow suit, Storch said.
UPS also will be focused on driving down its cost per package, which means taking on additional volume to offset its higher labor costs.
Tommy TuTone
As much as the IBT boys want to talk tough this is an excellent contract for the rank-and-file and should be accepted without hesitation. What, you want to complain about work conditions and not getting “more?” Take a look at Yellow and the plight of your brothers and sisters working in the LTL sector. Pigs get fat, Hogs get slaughtered.
UPS CEO Carol Tome is a CFO at heart, and is smart and shrewd. This written, all the internal tough talk from the Brown Corporate Clones was a waste of time and they should eliminate their little “how are we going to decertify/break the union” working groups. A waste of time. Most of the senior executives at UPS aren’t qualified to go to work back in the Hubs, let alone run a multinational. That Brown gravy train is running out, as customers will be hard-pressed to swallow the significant rate hikes coming in the years ahead. UPS’s material cost-to-serve disadvantage will only be exacerbated, and will be a drag on the stock price for years to come.
At some point the goose laying all these brown (golden) eggs will die, and the IBT will be complicit in this traagedy. TuTone is a short seller!!