(MONEY Magazine) – He's only been on the job for five months, but United Parcel Service CEO Michael Eskew already has his hands full. He's launched a $45 million advertising campaign--the company's biggest ever--and continued extending UPS' push into non-package-delivery businesses such as finance and logistics services. To top it off, he and his management team are in the throes of contract negotiations with the Teamsters Union, which represents 210,000 UPS drivers and other employees. The existing contract expires in July, and Eskew can ill afford a repeat of 1997's debilitating two-week strike.

Eskew became CEO following the retirement of Jim Kelly in January. A UPS lifer who started with the company's industrial-engineering department in 1972, Eskew has taken the reins at a crucial moment in UPS' 95-year history. The shipping giant went public in 1999, and its share price is down 14% since the offering. (The IPO was bid up by dotcom investors who viewed UPS as a backdoor e-commerce play). Meanwhile, UPS is now operating in 451 markets across the globe, meaning that Eskew can no longer count on geographic expansion for the bulk of the company's growth.

Eskew's expansion strategy is the same as the one embraced by Kelly: Offer new services to existing customers. UPS' logistics unit, for example, packs and ships Compaq computers and Samsung cell phones for delivery, and handles repairs and returns. Eskew recently sat down with MONEY senior writer Jon Birger to discuss these new businesses as well as the status of the Teamsters talks.

Q. It sounds as if you expect a lot of growth from the logistics business--everything from managing customers' warehouses to handling requests for parts and service.

A. Logistics is a way to feed our core network. We're working with our customers, working with their order-fulfillment needs, managing their inventories and helping them with their supply-chain needs. Meanwhile, an awful lot of those packages become UPS packages and end up on the back of our trucks.

Q. Are these extra services simply a way of creating more package volume or are they profit centers? For example, can you make money maintaining Compaq's warehouses and repairing its computers?

A. We think it needs to be profitable and will be profitable this year.

Q. UPS Capital, your finance unit, is growing pretty rapidly. Bill collection, letters of credit and small business loans seem pretty far afield for UPS.

A. If it enables global commerce, it fits our strategy. Think about it this way: An awful lot of our customers have always done business face to face, and they only know how to collect payment face to face. These days, though, our customers are getting requests from all over the world. We're the ones that time-stamp the turnover of the goods and make the delivery. It's a logical next step to have us help collect funds.

Q. So greasing the wheels eventually translates into more shipping business for you.

A. Absolutely.

Q. Presumably that's also why you've begun making loans secured by customers' inventory. But why would companies turn to UPS for this instead of their banks?

A. It's very hard to make these loans unless you control the inventories, unless you're running the warehouses, unless you know you've got a good handle on the quality and condition of the inventories.

Q. It sounds like you're building UPS Capital much the same way General Electric built GE Capital, which is now responsible for nearly half of GE's earnings. Do you have similar hopes for UPS Capital?

A. We don't aspire to be GE Capital by any stretch of the imagination. We want to help our customers expand their business. That's the drive behind UPS Capital.

Q. Because of Enron, you're getting into this business at a time when finance units of nonfinancial companies are being closely scrutinized by investors. Are you at all concerned about this?

A. We're a 95-year-old company with a triple-A credit rating. It's a simple business. We keep a pretty fully transparent balance sheet. We describe everything we've got.

Q. It seems every big-company CEO we sit down with these days believes China is a huge opportunity. UPS began flying into China last year. Are you similarly optimistic?

A. I was there for a conference in October, which was my first trip to a non-Hong Kong, non-Taiwan part of China. When you see it, you can really appreciate the fast pace and the growth. There are 60 million people on the Internet there. I really think it's going to be a terrific place to do business. And they're looking to do business.

Q. I would think UPS would be something of a leading economic indicator. Do you see the same signs of recovery the economists do?

A. We think we're a concurrent indicator, not necessarily a leading one. We have seen some growth in our international and logistics businesses, but overall it is still pretty flat.

Q. Let's shift gears. Your contract with the Teamsters expires at the end of July. A. We're confident we're going to be able to do a deal that's fair for our people. We've dealt with the Teamsters for 80 years. We've had one nationwide strike, and I think that strike had a whole lot less to do with UPS and the Teamsters than it did with the person who was running the Teamsters five years ago. That person is no longer there. [Former Teamsters president Ron Carey has since been replaced by James P. Hoffa.] We need to get this contract done.

Q. Is there any indication customers are hedging the strike risk by shifting a small amount of their deliveries to your rivals?

A. We don't see signs of that, and we would know, our drivers would know. I think our fourth quarter was as strong as anybody's and, quite frankly, I don't think our customers are willing to give up the best service and the best value out there.