UPS Freight shippers took volume elsewhere as strike concerns loomed. Will they return?

A lighter load these days. (Photo: Shutterstock)

A lighter load these days. (Photo: Shutterstock)

As the clock ticked down earlier this month toward a threatened nationwide strike by 11,600 Teamsters at less-than-truckload carrier UPS Freight, parent UPS Inc., (NYSE:UPS) concerned about stranding freight in the unit’s system should a walkout have occurred as soon as today, advised its customers to seek alternate means of transportation.

Some customers took heed. For example, LTL carrier Estes Express Lines, also based in UPS Freight’s hometown of Richmond, Va., captured a meaningful amount of diverted freight, according to a source close to Estes. The carrier hopes to retain between 10 and 20 percent of that new freight, according to the source. Estes’ CEO, Rob Estes, did not respond to an e-mail seeking confirmation and comment

LTL carrier ABF Freight, a unit of Ft. Smith, Ark.-based ArcBest Corp., (NASDAQ: ARCB) also saw an undetermined share of diverted freight come its way, according to Kathy Fieweger, a company spokeswoman. Jeff Brady, who runs transport and logistics operations for e-tailer overstock.com (NASDAQ:OSTK), said today that he is aware of shipper colleagues who bailed on UPS Freight because they were too risk-averse to wait around for an outcome, especially so close to the holidays. Brady, who in a posting last week on the social media site Linked In criticized UPS and the Teamsters for putting shippers in a difficult position while the two sides sorted out their differences, said he has not used UPS Freight for years because its labor battles introduce too much risk into his operations. 

Brady, who has worked in high-level transport and logistics positions at various retailers over a 20-year career, said he prefers not to bring UPS Freight on board if he is choosing transport vendors from scratch, or he would work to replace it if he inherited a relationship with the carrier. Brady said he is a heavy user of UPS’ small-package services.

An undetermined amount of UPS Freight customers was pushed to freight brokers, who then distributed it to other LTL carriers. UPS did not return an e-mail request seeking comment.

UPS Freight is the nation’s fifth-largest LTL carrier with 2017 annual revenue of about $2.6 billion. It moved 2.8 billion pounds in the third quarter, according to company data. The labor tensions came amid a climate of tight capacity in LTL, which is a concentrated market with virtually all traffic controlled by the top 7 to 8 carriers.

Last night, UPS Freight Teamsters voted by a 77-23 percent margin to ratify an updated version of a 5-year contract that about 62 percent of the rank-and-file rejected about a month ago. The two sides agreed to a 30-day contract extension following the first vote. The extension, and the contract, was set to expire at 12:01 AM ET this morning. The union’s negotiating committee in charge of the UPS talks said it would have no choice but to call a strike should members reject the revised version. The union would not give a date as to when it would take such an action.

In response, UPS announced Nov. 1 that it would not accept pick-ups of any freight scheduled for delivery after Nov. 8. The unit also said it would clean out its pipeline by the close of business Nov. 9. 

The Teamsters for a Democratic Union, a Teamster dissident group that clashes with mainstream leadership and that has opposed the contract as being substandard, said last night that the dramatic shift in the two outcomes were due to rank-and-file concerns over a system shutdown and subsequent union job losses. Another factor, according to TDU, was the union’s ratification of the much-larger small-package contract, which covers 256,000 UPS employees. With those contract talks out of the way, UPS could focus its hardball tactics on UPS Freight members, who were hobbled by a lack of support from Teamster leadership, TDU said.

The small-package contract was the subject of its own controversy. The compact was rejected by about 54 percent of those who voted. However, Teamster negotiators invoked language in the constitution known as the “two-thirds” provision to ratify the agreement. The language states that as long as fewer than 50 percent of eligible voters cast ballots, a contract must be ratified unless at least two-thirds of those who vote reject it. About 42 percent of 209,000 eligible voters cast ballots.

The last-time UPS came this close to a nationwide walkout was in 1997, when the Teamsters staged a 15-day walkout that shut down UPS’ ground parcel network. (The company did not have a stand-alone LTL operation at the time). The strike forced UPS customers to go elsewhere for deliveries. A percentage of those shippers, many of whom had used UPS exclusively, either never returned or, in a more common practice, spread their parcel spend across multiple providers.