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Rivals nip at UPS's heels
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August 4, 1997: 2:47 p.m. ET
Competing carriers grab diverted traffic, could see long-term gains
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NEW YORK (CNNfn) - United Parcel Service has long dominated the package delivery business -- but the Teamsters strike called Monday could give other carriers a chance to start nibbling away at the giant, analysts speculate.
In the short term, the strike will mean some added business for the competition as commercial shippers try to divert as much traffic as they can to other carriers. Depending on how long the strike lasts that crossover business could become permanent.
Additionally, UPS could end up increasing its labor costs to settle the job action. That would give its lower cost, non-union competition an edge in the market in the long term, analysts point out.
"The longer the strike goes on, the more (competitors) are likely to benefit," said Jeffrey Pittsburg of Goldis-Pittsburg Institutional Services Inc.
The Teamsters sent their 185,000 members off the job at 12:01 a.m. Monday after negotiations between the two sides collapsed. The walkout is the largest job action in the country since March 1996.
Privately held UPS handles packages for hundreds of thousands of U.S. businesses and the strike could have a profound effect on the economy, analysts said.
A White House spokesman said President Clinton wouldn't step in to stop the strike. Clinton could order the strikers back to work under the Taft-Hartley Act if the action jeopardizes national health or safety.
"I still think the parties ought to go back to the table," Clinton told reporters at the White House. "At this time, I don't think any further action by me is appropriate."
Transportation Secretary Alexis Herman urged the two sides to keep negotiating to avoid a disruption.
Ron Carey, president of the Teamsters, told CNNfn early Monday that there isn't any common ground between the union and the company. (132K WAV) or (132K AIFF)
"This is about good jobs in this country," Carey said. "Working people in this country are saying, 'Enough is enough.' They want decent jobs."
The two sides are knocking heads over pay and benefits and the use of outside contractors. The Teamsters are pushing for more full-time jobs, while the company wants to dramatically reform the pension plan.
Two Teamsters were arrested in Chicago early Monday on disorderly conduct charges for allegedly blocking trucks at a UPS terminal.
As picket signs are hoisted across the country at UPS facilities, competitors are watching orders increase.
Federal Express (FDX) has seen a "significant increase" in business since last week, said spokesman Greg Rossiter. FedEx stock was up 1-5/16 to 64-1/4 in afternoon trading on the New York Stock Exchange.
Rossiter pointed out that most of UPS's business is parcel post, or slow moving, while FedEx is an express service. UPS handles about 2 million packages a day using express service, compared with 2.8 million daily for FedEx, Rossiter said.
Pittsburg thinks Federal Express could benefit. The company was doing well before the strike, he said. Stock was up, inflation is low, and the economy is good.
Airborne Express (ABF), based in Seattle, saw business rise 108 percent in July over June figures, said spokesman Tom Branigan. He attributed the increase to the threat of a strike. The company didn't add customers, but took extra business from customers who use both Airborne and UPS.
"It's not like we're not interested in increasing business," Branigan said. "(But) we're not looking at this as a way to take UPS customers."
Airborne's stock was up 7/8 to 48-5/8 in afternoon trading on the Big Board. Branigan said the company's stock was on the rise before the UPS strike.
Companies that aren't unionized could reap more benefits if UPS has to pay out a lot in a new contract, Pittsburg said.
"The private market could come out ahead," he said. "The non-union companies could come out ahead in pricing."
RPS Inc., a Pennsylvania-based parcel carrier, has seen business rise 10 percent among existing customers, said Bram Johnson, vice president of marketing. The company hasn't been taking new customers since July 1. The increase is among customers who use more than one carrier.
"We have many customers who split their business, and we are very, very busy," Johnson said. He said it's hard to tell if there's been an effect on company stock, since RPS is a unit of Caliber System Inc. (CBB), a diversified company that provides transportation and information services.
Steve Lewins, an analyst with Gruntal & Co., estimated that competitors might wind up with long-term contracts for about 500,000 of UPS's 12 million daily load.
"There will be some permanent losses (for UPS) that they'll make up through growth over time," Lewins said.
Lewins said he doesn't think the Teamsters' demands for better contract terms will raise standards for pay and benefits in the industry.
"We've seen unions get more aggressive since 1994," Lewins said. "There really isn't a whole lot of sympathy for the Teamsters. It's a tarnished union."
Emery World, based in California, temporarily leased four L-1011 aircraft to handle bigger demand, said spokesman Rocco Sacci. The company had planned the extra planes before the strike. But he added, "It's a very opportune time for us because we do have the added capacity and we'll try to accommodate the UPS business."
Emery is giving preference to its long-time customers but will service UPS clients on standby if there's room, Sacci said. The company is owned by Consolidated Freightways (CNF).
One advantage for UPS is that the strike is taking place during a relatively quiet period when many people are on summer vacation. Should the strike last into the fall and the holiday months, it could pose serious problems, he said. But Lewins said he doubts the strike will last long because the Teamsters are low on cash. 
-- Martine Costello
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