UPS Workers Near Strike As Negotiations Fall Apart
Key Takeaways
- United Parcel Service (UPS) workers are nearing a strike this week following unsuccessful talks between the company and the Teamsters Union
- A strike could disrupt the national supply chain and derail scheduled package deliveries for millions of Americans
- There’s still time for a deal, but UPS shares fell by as much as 3% on Wednesday morning amid the uncertainty
The Teamsters Union represents about 340,000 full and part-time drivers, loaders, and package handlers at UPS. Negotiations stalled this week, with both sides pointing the finger.
The union said UPS made an “unacceptable offer,” while UPS said in a statement: “Refusing to negotiate, especially when the finish line is in sight, creates significant unease among employees and customers and threatens to disrupt the U.S. economy.”
Notably, if the UPS strike happens, it would be the largest single-employer strike in U.S. history. But what would the consequences be on Wall Street? Let’s get into it.
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What’s the strike about?
The previously negotiated labor contract that covers unionized employees at UPS will expire at the end of this month. The union has authorized a strike in the event that a deal is not reached by then.
The union hopes to secure higher wages, more full-time employment, wage parity for workers doing the same job (regardless of tenure), and the removal of delivery trucks’ surveillance cameras.
UPS maintains that the current contract is a good one, calling it “historic.” The company also emphasized that it delivers the equivalent of about 6% of the nation’s gross domestic product — highlighting the potential widespread impact of a work stoppage.
Can UPS still deliver returns?
UPS saw a big boost during COVID-19 due to the increase in online shopping and deliveries, hitting a record profit for 2022 when its revenue reached $100 billion. But those tailwinds may be subsiding.
UPS reported an operating profit of $2.5 billion in Q1 of this year, down 21.8% compared to the same period last year. Lower U.S. retail sales and weak demand in Asia were to blame for the downturn.
Investors, likely already wary of recent UPS performance, are keeping a close eye on this strike. The last time UPS had a major strike was in 1997 and it cost the company about $850 million. Today, our economy is more dependent on shipping logistics than it was in the late 90s, so it’s no surprise that UPS shares fell in premarket trading on Wednesday after word of the unsuccessful negotiations got out.
The bottom line
It’s still early in the month, which means there’s plenty of time for a deal to stabilize things for the shipping giant. If there’s no deal, UPS shares will likely slip.
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