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UPS lies low as FedEx Ground contractor dispute simmers

UPS appears uninterested in pursuing volume from chief rival, at least for now

UPS may steer clear of FedEx Ground dispute (Photo: Jim Allen/FreightWaves)

In normal times, UPS Inc. wouldn’t hesitate to capitalize on turmoil at its chief rival, FedEx Corp., to pursue business from anxious FedEx shippers. But the ongoing set-to involving FedEx Ground’s driver contractor network does not represent a normal time.

Those following UPS (NYSE: UPS) said it has shown little interest up to now in chasing FedEx Ground business. This comes as Spencer Patton, a former FedEx Ground contractor engaged in a very public spat with FedEx Ground (NYSE: FDX) over the financial condition of the contractor network, has warned that more than one-third of the 6,000 contractors are in such deep financial trouble that they could go out of business before the end of the year.

This, in turn, could wreak havoc on FedEx Ground’s peak season delivery schedules, Patton, through his newly formed Trade Association for Logistics Professionals, has said.

Ravi Shanker, transport analyst at Morgan Stanley & Co., (NYSE: MS) has come the closest to implying that UPS might step into the fray. In a note published Wednesday, Shanker surmised that FedEx Ground’s issues “may provide a volume opportunity” for UPS, and that the company “may already be in touch with some [FedEx] customers preparing for peak contingencies.” 

Shanker, who published his note the day after an analyst meeting with UPS, said senior management would not offer detailed comments on their intentions, if any.

Josh Taylor, senior director of professional services at Shipware LLC, a consultancy, and a longtime UPS executive, said that UPS, facing potentially contentious contract talks with the Teamsters union, wants no part of a battle that pits a rival carrier against its drivers. UPS’ leadership believes that getting enmeshed in such a fight is something that “should be avoided,” Taylor said.


UPS and the Teamsters, which represents about 380,000 UPS employees, expect to begin negotiations during the first half of 2023 on a new collective bargaining agreement. Teamsters General President Sean O’Brien, who battled UPS for years while running Teamsters Local 25 in Boston, has said his members will walk off the job if a tentative agreement is not reached by Aug. 1, 2023, the day after the current five-year contract expires.

Shanker said in his note that UPS CEO Carol B. Tomé expects the negotiations to start late and get noisy once they are underway. According to the note, Tomé expressed confidence that an agreement will be reached, noting the long and shared history of UPS and the Teamsters and the company’s belief that its starting point for wages and benefits is typically very competitive.

Drivers in different worlds

Drivers at the two companies operate in different worlds. FedEx Ground’s model is nonunion and is based on independent businesses acquiring territories, or routes, and then hiring drivers to pick up and deliver parcels and to provide line-haul service between its hubs. Contractors are paid on a per-stop or per-mile basis. 

UPS’ full- and part-time drivers are unionized except for those who use personal delivery vehicles to haul parcels. UPS’ unionized drivers are salaried and are entitled to benefits, the latter of which is uncommon among FedEx Ground’s contractors and drivers.

Despite the contrast, from a functional perspective the bottom line is the same, said Taylor: If the carriers cannot keep their drivers happy, packages don’t get delivered. UPS’ senior management, Taylor said, is mindful of how the Teamsters might react to the company trying to take market share from FedEx Ground under the current circumstances.

“Any UPS rep who wins business today because of Spencer Patton will have a hard time keeping that business next year because of Sean O’Brien,” he said.

Satish Jindel, founder and president of Ship Matrix Inc, a consultancy, agreed that the timing and optics relating to labor issues would augur for UPS to effectively remain on the sidelines. However, there are other issues that would also incent UPS to stand down, he said. 

UPS, which like FedEx focuses on high-margin small to midsize businesses (SMB), would have little interest in courting FedEx Ground’s large-volume or “enterprise” shippers that might be most affected by any service disruptions, Jindel said.

FedEx Ground’s SMB customer base would see no reason to shift to UPS unless FedEx Ground’s on-time delivery performance deteriorated markedly, he said. Based on ShipMatrix data, FedEx Ground’s on-time delivery rate is around 93%, a level it’s been at for several months. That represents a significant improvement from the 89% on-time performance rate recorded late last year, according to the data.

UPS’ on-time delivery rate is currently in the 95% to 96% range, Jindel said. The differential, Jindel said, is not wide enough to send FedEx Ground’s SMB customers fleeing, he said. “If those customers were happy with its service several months ago, they should be happy about it now,” he said.

If UPS wanted FedEx Ground’s peak business, it has the capacity to manage it. Seasonal tightness in labor, equipment and infrastructure, which were major issues for shippers and carriers during the pandemic-fueled 2020 and 2021 peaks, is not expected to be a significant factor in the upcoming cycle, Jindel said. Residential delivery volumes will level off considerably as consumers continue to return to in-store shopping and do less online buying, he said. High inflation will curb consumer buying power, which means fewer online orders, Jindel said. 

In addition, parcel delivery carriers of all types expanded their network and infrastructure over the past two years, creating a level of slack that didn’t exist during the past two years, Jindel said.

14 Comments

  1. K.C. Knack

    There is a lot less slack in the UPS system then Jindal thinks. My center has been working most of its drivers 60 hours a week, the DOT maximum, for the entire year we have such a shortage of workers. I know it’s similar story at other hubs as well. That existing labor shortage is going to put quite a damper on the usual peak season hiring spree. I doubt very much we will have the people to cope with the volume.

    Also, we’re not salaried. We get paid an hourly wage.

    1. Stephen Webster

      same in ont companies like costco are paying $25 plus for peak season workers for delivery and business centers no commercial driver permit required. One facility in huron county is spending over 10 million to build a new apartment building to keep and be able to attract employees with skilled from Quebec starting pay is $24 hr plus will rent them apartment at 28% of take home pay. they bought one 11 unit building last yr. I do not know of anyone who is not working that wants to at the homeless shelters I vol at.

  2. Dennis McNeal

    UPS drivers are paid by the hour, not salary. Straight time for 8 hours, time and a half pay after 8 hours 1 second. 9-12 hours a day.
    In an effort to save 2 gallons of fuel per driver, per day UPS pays driver 3 hours overtime to follow the failed Orion mapping system. UPS loves to spend 3 dollars to save a dime.

    1. dca

      Orion true purpose isn’t saving gas. It’s a data collection system to be used in creating a driverless delivery package car.

      That’s why they’ll eat the losses on it right now.

  3. Scott Haney

    as a former FedEx contractor of 11 years, I can say that Peak is the roughest time. You have to rely on FedEx to provide you with good data as to what projections will be in in your area, etc.
    If you plan wrong, it can possibly become difficult to get out of the hole.

  4. UPS driver

    Again more talk of a strike that may or may not happen. My money is on it not happening. Covid has changed everything. No way the US government lets us strike. They are already intervening in the railroad talks. And there is no way people are going to just flock back to stores and forget about online shopping. They may go back to stores but I’m betting better deals will be online. Don’t most of the big box stores want to do away with the obnoxious Black Friday morning crowds and give their employees more home time with their families? So soon we forget huh? FedEx might be in some trouble. Amazon might be in some trouble. Isn’t there another Prime Day or week planned in October some time? UPS will be fine. They limited Peak customer shipping last year and the year before so I doubt they want to tear too much into FedEx volume now. Lots of guessing and opinion in this article that these guys get paid to do.

  5. Kbolchal

    This is BS. UPS Digital Pricing has been an attack on USPS and FedEx for the lightweight 1 to 5 pound business since Amazon has taken business from them. UPS announced 29.4% increase in small business which is all at rates below Priority Mail. Carol Tome and her team are interested in backfilling lost revenue at margins higher than Amazon. Simple but true. My humble opinion from a low level.

      1. dca

        $15.00 per hr for PT air drivers. 16 after 1 yr. 17 after 2 years. 21 after 3 yrs. 28.64 after 4 yrs

        $20.50 per hr for combo (company choice by week: driver or warehouse worker. Tues-Sat schedule) driver (the ones they are hiring from the outside). 21.25 after 1 yr. 22.75 after 2 yrs. 25 after 3 yrs. 30.64 after 4 yrs. This position includes no OT protection.

  6. Daniel

    Ups drivers aren’t salaried. We’re hourly. Also, people have gotten accustomed to ordering everything online. Inflation or not I don’t see production going down. The truck is consistently filled to atleast an 8 hour day all the way to 22:56* aka 10:56 pm my latest punch out during a regular week. Ups plans on dropping the pvd’s “personal vehicle deliveries” and readjusting or getting rid of Amazon * who pays UPS pennies on the dollar for delivery and pickups* and USPS Surepost contracts as well. By getting rid of the Surepost it will create even more steady work for UPS drivers throught the change. I honestly don’t see anything slowing for UPS.

    1. Johnny m

      I deliver enough surepost for a whole route or two everyday to the post office. An I’m also still waiting for it to slow down we are a smaller center and I’m one of the lower drives but I have worked almost every day since 2020 sometime to almost DOT these “experts” don’t know first hand

  7. Robert Draper

    The 2nd sentence in this paragraph is a bit inaccurate: UPS’ full- and part-time drivers are unionized except for those who use personal delivery vehicles to haul parcels. UPS’ unionized drivers are salaried and are entitled to benefits, the latter of which is uncommon among FedEx Ground’s contractors and drivers.

    Just for clarification from a unionized driver, unionized UPS drivers are not salaried but hourly. That’s one of the benefits of driving for UPS vs FedEx.

Comments are closed.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.