[1/4]UPS vehicles are seen at a facility in Brooklyn, New York City, USA on May 9, 2022. Portal/Andrew Kelly/File Photo Acquire License Rights
Sept 12 (Portal) – United Parcel Service’s (UPS.N) new five-year contract with workers represented by Teamsters will cost less than the $30 billion announced by the union, the delivery company’s chief financial officer said on Tuesday.
The agreement covers approximately 340,000 UPS employees in the United States and will increase wages and benefits at a compound annual growth rate of 3.3% over the life of the agreement.
“Our calculation was certainly under $30 billion,” Chief Financial Officer Brian Newman told Portal, echoing what Chief Executive Officer Carol Tome said in a CNBC interview published earlier on Tuesday. Both declined to put a dollar value on the new contract.
When the agreement expires in August 2028, the average full-time UPS driver will earn about $170,000 per year in salary and benefits. Part-time union employees receive an hourly wage of $25.75 with full health and pension benefits.
The company, which has the best wages in its industry, said 46% of wage and benefit costs from the agreement would be accounted for this year.
While contract-related costs in the second half of 2023 are expected to be about $500 million higher than UPS expected, the impact of the entire contract is “fully consistent” with the company’s assumptions, Newman said.
Last month, the Atlanta-based company lowered its full-year revenue and profitability targets, citing higher-than-expected labor costs and business losses during turbulent contract negotiations with the International Brotherhood of Teamsters.
In the second quarter, UPS customers shifted about 1 million packages per day to the U.S. Postal Service, FedEx (FDX.N) and regional rivals.
UPS is on track to regain that business, said Newman, who expects the company will handle about the same number of packages this December as it did last year.
The Atlanta-based company is already slashing costs to offset lower demand and higher labor costs.
In the second quarter, 2,500 leadership positions were eliminated and selective management layoffs continued in markets such as Texas. In a separate move, it is offering early retirement to company pilots represented by the Independent Pilots Association.
The new Teamsters contract also gives UPS the opportunity to automate some work. The company has started using RFID tracking chips that could save workers from having to scan the roughly 20 million packages a day that are loaded into the ubiquitous brown delivery trucks.
Additionally, this technology could also reduce the number of times packages end up on the wrong truck and need to be redelivered from about 1 in 400 to 1 in 1,000, Newman said.
UPS shares were down 2.3% in midday trading.
Reporting by Priyamvada C and Baranjot Kaur in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Varun HK, Anil D’Silva, Nick Zieminski and Deepa Babington
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