Talking Pensions

Talking Pensions

Copyright 2007, Traffic World, Inc.

Shippers watching the UPS-Teamster contract negotiations this spring may be excused if they feel a slight pricking of their thumbs. It''s been almost 10 years since a 15-day walkout crippled UPS, costing the company at least $620 million in lost business and sending shippers scrambling to find alternative capacity.

That strike was a major victory for the Teamsters and it also boosted UPS''s competitors, shunting an additional 2 million packages a day to the U.S. Postal Service, for example.

Contract negotiations of this scope always make shippers nervous. Those edgy nerves cost UPS some freight during its 2002 contract talks, as skittish shippers moved packages elsewhere, primarily to FedEx Ground. Although the deadline in the current round of talks is still more than a year away, there are signs that shippers - and competing carriers - already are thinking about alternatives.

But a great many things have changed since then-Teamsters President Ron Carey locked horns with former UPS Chairman James P. Kelly in the first and only nationwide strike in the company''s history.

The big issue in 1997 was part-time jobs. Today, it''s pensions and health care.

In part, this reflects the continuing decline in overall U.S. union membership. In 2006, 12 percent of American workers - 15.4 million people - were union members, down from 20.1 percent in 1983, according to the Department of Labor. Several unionized trucking companies have shut down since 1997, led by national LTL carrier Consolidated Freightways and followed by regional carriers such as A-P-A Transport and USF Red Star.

As a result, multiemployer pension plans are under severe pressure.

The largest Teamster multiemployer plan, the Central States Southeast and Southwest Areas Pension Fund, was only 49 percent funded at the end of 2005. Companies such as UPS - the largest Teamsters employer - as well as LTL carrier ABF Freight System, are looking for ways to get out from under costly liabilities.

In previous negotiations, the pension plans were sacrosanct. But this time UPS has gone so far as to propose creating a joint Teamster-UPS administered pension fund while paying a lump sum - billions of dollars - to Central States to cover its withdrawal liabilities.

Perhaps UPS senses a shift in labor priorities. A variety of reports indicate that, in a world dominated by 401(k)s, younger union members are more concerned about higher wages than pensions. That''s not the case with older workers who see their pensions as a crucial benefit to fight for.

The Teamsters aren''t dismissing the proposal, but they''re a long way from accepting it. "It is a serious proposal that must be seriously evaluated," Ken Hall, head of the Teamsters Parcel and Small Package Division, said in May. But he added that the pension plan was included in a wide range of contract changes that would be "almost universally unacceptable."

What the Teamsters and UPS eventually decide may affect many thousands of union employees and retirees who never worked for UPS. They must be asking, "What will Brown do for me?"