Analysts: Walkout at UPS Would Have Deep Impact on Economy
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The potential for a strike by UPS workers if a new labor agreement isn’t reached with the International Brotherhood of Teamsters holds significant implications across the supply chain, industry analysts said.
“UPS is huge. They have multiple businesses that could be affected by this, everything from the overnight air service to the regular ground parcel and their LTL business,” said Paul Bingham, director of transportation consulting with S&P Global Market Intelligence. “They’re a big player in many portions of freight activity.” He added, “A strike — if it happens — until it gets resolved, it is going to be a problem.”
The current contract for 340,000 unionized UPS workers expires July 31, and the Teamsters have said members will not work under a contract extension. Talks have been at a standstill since just after the July Fourth holiday.
On a daily basis, UPS moves an estimated 25 million parcels, which accounts for 6% of the nation’s gross domestic product. A strike would affect many sectors of the American economy.
“An area that will get hurt very quickly is health care,” said Michigan State University Associate Professor for Supply Chain Management Jason Miller. “Surgical devices, medical devices, the distributors to hospitals rely very heavily on UPS. Another area is the [movement] of electronic components. If you look at defense contractors who use a lot of electronic pieces, they’ll be impacted. Apparel will be hit, [and] spare parts for motor vehicles. A lot of stuff gets shipped to the distributor warehouses by parcel carriers — spare parts for agriculture and spare parts for construction. E-commerce will be affected. We just can’t replace UPS’ volume.”
Bingham noted that while UPS’ rivals could step in, they wouldn’t have sufficient capacity to completely fill the void.
“We can’t add enough to make up for UPS,” he said. “You can’t just show up and say, ‘FedEx, you handle it.’ And that’s the same with the U.S. Postal Service and the regional carriers and internationally, like DHL. There is not enough collective capacity to handle it. There will be disruptions. There will be delays.”
For its part, FedEx is advising UPS customers to establish an account now if they want to plan for a potential strike later in the summer, as they will prioritize shipments for existing customers should one take place.
“In the event of an industry disruption, FedEx Corporation’s priority is protecting capacity and service for existing customers. Therefore, shippers who are considering shifting volume to FedEx, or are currently in discussions with the company to open a new account, are encouraged to begin shipping with FedEx now,” FedEx said in a statement on July 6.
The breakdown in talks followed several days of productive negotiations, with the two sides reaching a deal on the previously contentious issue of two-tiered wage and benefit scale for drivers and package handlers that was adopted in 2018 when the company added weekend delivery service. Both sides have blamed the other for the breakdown in talks.
TEAMSTER PRACTICE PICKET LINES READY FOR THE REAL THING
Rank-and-file #Teamsters at @UPS continue to reinforce #strike plans across the nation. #1u #HotUnionSummer pic.twitter.com/P6gviqb6Oc — Teamsters (@Teamsters) July 10, 2023
If the stalemate continues, Michigan State’s Miller believes the Biden administration could be called in to mediate.
“I can’t believe you won’t see the big users of the parcel sector saying to the White House this week, ‘You need to intervene,’ ” he said.
UPS in a statement said it wants the union to return to the negotiations and, “continue building on the significant progress we have made.” It added that halting negotiations now, with the finish line in sight, “creates significant unease among employees and customers and threatens to disrupt the U.S. economy.” It added, “We are proud of the proposals we have put forward that delivers wins for our people.”
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