UPS Freight to ‘empty network’ ahead of potential strike

UPS Freight to ‘empty network’ ahead of potential strike

LTL shippers must scramble to find alternatives and anticipate higher pricing, as UPS Freight stops taking freight ahead of a Teamster vote on its ‘last, best, final’ contract offer. Photo credit: Shutterstock.com.

US shippers of palletized freight are bracing for a truck price spike as UPS Freight, the fifth-largest US less-than-truckload (LTL) carrier, begins to empty its network of freight, refusing inbound shipments starting Thursday in anticipation of a Teamsters union strike.

The unprecedented move by UPS Freight will force shippers to find other LTL carriers at a time when LTL capacity in general is stretched thin. Freight is unlikely to be stranded, but it will probably move at a premium, as LTL carriers prioritize freight from existing customers.

Industrial shippers likely to be hit hardest

Any disruption will likely hit industrial shippers hardest, as industrial products represent the majority of LTL freight. But the LTL sector has been moving further into the retail business as e-commerce fulfillment and replenishment demand more frequent and smaller shipments.

There will be no impact on the UPS express and ground parcel network, operated separately from the industrial freight division. The Teamsters union ratified a new five-year package contract with UPS Oct. 5, even though a majority of those who voted opposed the deal.

In a letter to customers obtained by JOC.com, UPS Freight said it will stop accepting new shipments and work to empty its network of freight by Friday, Nov. 9, the eve of a vote on the LTL carrier’s “last, best, and final” contract offer. An initial proposal was rejected last month.

“Because we do not have a guarantee against a work stoppage, we cannot afford to put our customers’ volume at risk of being stranded in our system,” the LTL trucking arm of UPS said in the note. “We simply can’t afford to take the chance of stranding our customers’ volume.”

The fifth-largest US LTL operator said it would stop pickups on a phased schedule based on shipment length, starting Nov. 1 for five-day shipments and ending on Nov. 7, next Wednesday, for one-day shipments. UPS Freight Teamsters vote on the contract proposal Nov. 7-11.

A 30-day contract extension expires Monday, Nov. 12. “If you reject this final offer … there will be a strike at a time and location(s) determined by the negotiating committee,” the UPS Freight National Negotiating Committee said in an Oct. 25 memorandum sent to members.

In its memorandum, the negotiating committee admitted it had not been able to reach a revised tentative agreement, although it said it had won some minor concessions on vacation time, pension credits, and pay rates for drivers who also occasionally work on the docks.

Big issue: amount of work that can be subcontracted

The amount of work that can be subcontracted to other freight haulers is a major issue for UPS Freight Teamsters and was a stumbling block in contract talks. The company proposed reducing the amount of work subcontracted by 4 percent over the life of the five-year contract.

Subcontracting is a “huge” issue for the UPS Freight rank and file, but not the only one. “It’s a long list of concerns with these contracts, it’s not just the big items,” said Nicholas Mayo, a pickup and delivery driver and member of Teamsters Local 25 in the Boston region.

“They’re trying to force through a substandard agreement we truly do not want to accept,” Mayo said in an interview. “This is there way to manipulate a ‘yes’ vote.” UPS Freight is subcontracting hundreds of millions of dollars in work “when we’ve got guys sitting at home,” Mayo said.

 The union and UPS Freight are now on the brink of what would be the first strike against a large LTL carrier since the Teamsters organized a strike against more than 20 companies in 1994. That strike led to the closure of several companies and boosted non-union LTL carriers.

This is a different era however. For one, LTL carriers are enjoying the strongest freight market and demand for their services since 2004-2005. They’ve been struggling this year to keep their networks from being disrupted by excess freight spilling over from a tight truckload market.

“Shippers going to other carriers shouldn’t expect discounts,” said Satish Jindel, president of SJ Consulting Group, Pittsburgh. “Their freight will be moved but they should expect to pay a premium price. In this market, anyone who takes that business will not want to keep it too long.”

He now believes business lost by UPS Freight would return once a strike was settled. “The Teamsters are getting an advance notice,” Jindel said. “UPS Freight is saying we will not let you disrupt customers by having freight sit on the dock and get trapped in our system.”

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.

Comments

Buckle up, folks. Even if the Teamsters approve the deal, there will be disruptions probably through to Thanksgiving week as volume shifts out of UPS Freight and back into it after a hypothetical approval. Thankfully, UPS Freight is not our biggest LTL provider by a long shot... but they handle arguably our most critical portion of LTL business.