UPS Workers Could Strike This Summer. What to Know.

UPS and the Teamsters have been negotiating a new collective bargaining agreement since April. More than 70% of UPS employees in the U.S. belong to labor unions, including some 340,000 Teamsters. Pilots, mechanics, and other workers belong to separate unions with their own contracts, as do UPS employees abroad. The company has more than 500,000 total employees.

“If this multibillion-dollar corporation fails to deliver on the contract that our hardworking members deserve, UPS will be striking itself,” Teamsters general president Sean M. O’Brien said in a statement. “The strongest leverage our members have is their labor and they are prepared to withhold it to ensure UPS acts accordingly.”

On Friday, the Teamsters union said that 97% of members had voted to authorize a strike if a deal with UPS isn’t reached by the expiration of the current contract on July 31. That puts a potential labor stoppage around six weeks away—but there’s still plenty of time for the two sides to reach a deal.

“The results do not mean that a strike is imminent and do not impact our current business operations in any way,” UPS said in a statement. “We continue to make progress on key issues and remain confident that we will reach an agreement that provides wins for our employees, the Teamsters, our company, and our customers.”

Investors have been focused on UPS’ expenses this year. Consumer spending on goods—and online shopping in particular—took off during the Covid-19 pandemic, benefitting UPS and

FedEx

(FDX), but so did the companies’ costs related to fuel and labor. That was fine as long as demand was soaring, but with a potentially slowing economy and retail sales in 2023, there’s more concern this year about UPS’ ability to pass along expenses—and keep profit margins intact.

Wall Street expects UPS’ revenue to be down 3.6% in 2023, to about $97 billion, and for operating earnings to be down 12%, to $12 billion. That’s about a 1.5 percentage point contraction in the company’s operating profit margin.

Teamsters members received a 6.1% average wage increase in August 2022 under their previous contract with UPS. Citi analyst Christian Wetherbee estimates that total wages and benefits paid to Teamsters-represented employees represents about $30 billion in annual spending for UPS. 

Another roughly 5% increase would shave roughly 25 cents from UPS’ annual earnings per share, per Wetherbee’s math. That’s about 2.3% of the $10.72 per share on average that Wall Street analysts expect the company to bring in this year, or 2.1% of next year’s $11.78 consensus forecast. The new contract would kick in on August 1, so the impact could start to be felt in the third quarter.

UPS stock has returned 4.6% including dividends so far this year, versus a 36% gain for rival FedEx. The

S&P 500
has returned 15% in 2023, while the

Dow Jones Transportation Average
has returned 11%.

Write to Nicholas Jasinski at [email protected]