Current economy fractures an image of labor harmony UPS: Management and union members are swearing to outfight and outlast each other in the carrier's first nationwide strike.


If ever there was a company crafted to produce labor harmony, it was United Parcel Service. It's where every delivery driver has a crack at rising to chief executive, just like the current boss. Where about half the full-time union members own the company's steadily rising stock. Where chocolate-brown uniforms bestow status and salaries far higher than the competition's.

But last week, UPS looked as fractious as any airline or automaker struggling to keep down labor costs. Management and Teamsters union members are swearing to out-bloody and outlast each other in the company's first nationwide strike.

The UPS story illustrates how, in the current economy, even a company where all executives once carried Teamster union cards and still eat in the employee cafeteria can be torn apart.

Like so many other businesses, UPS faces potent competitors, FedEx most of all. While UPS remained identified with boxy trucks, FedEx became synonymous with overnight delivery by jet. FedEx, the clear leader in shipping by air, also has the benefit of a lower-paid work force, virtually union-free except for its pilots. UPS has the largest Teamsters union bargaining unit, with 185,000 members, in the nation.

To compete, UPS has rapidly expanded its own overnight service. Hiring swarms of part-time package sorters and loaders has kept costs low. Though they are union members, with many benefits, they work only a few hours a night at roughly half the $20 an hour rates of full-time employees.

The union, angry that since 1993 all but 8,000 of 43,000 new jobs have been part-time, demands that the company create more full-time jobs. This, and a fight for control of the pension fund, are the prime strike issues.

Though FedEx has a higher growth rate, UPS continues to produce record results. With 80 percent of the market for package shipments on the ground, it had profits of $1.1 billion on $22.4 billion in sales last year. Although FedEx and other rivals have picked up all the UPS shipments that they can handle, there are few signs that UPS has lost much business permanently. Its largest customers, such as J. C. Penney Co., have spent heavily to integrate their own computer, accounting and inventory systems with UPS under long contracts and cannot switch shippers overnight. But some other customers, the company says, have threatened to switch for good.

Far more than the Teamsters, UPS has the wherewithal to survive a long strike. Standard & Poor's affirmed the carrier's AAA credit rating Monday after most UPS trucks came to a halt. "As they have a huge market share," said Philip Baggerly, an S&P; managing director, "to a large extent they can't be replaced."

But there are financial strains. A company that long avoided debt has piled up borrowings of $2.8 billion, mostly for airplanes and computers. It plans to spend $2 billion expanding and upgrading its equipment this year, as much as over the past five years combined. In addition, it has to cover losses, of $200 million last year, in building its business abroad.

Like other UPS officials, James P. Kelly, the chairman and chief executive, usually rides coach on planes. He began as a delivery driver and earned his management degree by taking night classes at Rutgers University. At a company whose founder invited the Teamsters in 70 years ago, Kelly spent several years as the chief labor negotiator, priding himself on smooth relations.

"Given that all the managers are former rank-and-file workers, there's no Frank Lorenzo-style leadership here," said Emory University management professor Jeffrey Sonnenfeld, a UPS consultant, referring to the combative former Continental Airlines chief.

Even so, union leaders point to accumulating aggravations. The company, which Sonnenfeld describes as collegial as a Quaker meeting but as combative as the Marines, has long deployed platoons of industrial engineers to monitor and speed every step its workers take.

While many union members considered regimentation a fair trade-off for high wages and a chance to move up, reformers say that the company's labor peace reflected a complacent union.

Teamsters President Ron Carey, a former UPS deliveryman in Queens, N.Y., has been feuding with the company ever since he led several local strikes decades ago, before the union had a national contract. In 1994, when the company raised its package weight limit from 70 to 150 pounds, Carey called workers off the job for a day.

So far, the Teamsters have nearly halted the company's operations. With managers driving trucks and flying planes last week, the company was handling only a few hundred thousand of the 12 million packages it normally moves a day.

Losses are estimated at $50 million a day.

Pub Date: 8/10/97

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