The whole contract is concessions by both sides. However, I hope that both the union and the company work on coming up with a contract that can make it that UPS can be competitive in the marketplace. In the past, FDX had much lower costs, but they had the disadvantage of having a large disadvantage in delivery density. FDX Ground has grown at a very fast rate, espescially recently. The density gap is closing. If FDX does ever combine their two units then this will reduce a huge amount of duplicate costs that they currently incur. I think it's a mattter of time and within 5 years you will see FDX ground and FDX Air merge into one unit similar to how UPS operates. I didn't think this would have happened, but with all the lawsuits that it is a matter of time, where they will see it is profitable to combine their fleets together.
If you look at the financial reports from FDX, in FY 2008 FDX Ground delivered 3.365 Million Pkgs/Day, In FY 2011 FDX delivered 3.746 Million Pkgs/Day. A change of almost 400,000 pkgs per day. If you figure 2 pieces per stop, that's 200,000 stops per day. (This is just the growth over 3 years, not total volume\stops). At 200 spc, that's 1000 driver routes alone lost due to FDX growth. Now, you may dispute pkgs/stop or spc. But there's not much denying that for every package that FDX Ground delivers that is a package delivered by our non union competitor and a package that UPS could have\should have delivered.
One of FDX's biggest marketing now is on much faster FDX ground is compared to UPS ground. If you don't believe me, go to FDX's website and look at their transit time and compare it to our transit time on ups.com.
The main reason FDX has a larger advantage is that their feeder network feeding loads from hub to hub is done by "gypsy" non union drivers vs using either our union drivers or by TOFC. Now I'm not talking about the work going from the local hub to the local center and back. I'm talking about the long haul work. If you look at Burlington VT, it takes UPS 4 days to get to FL, and 4-5 Days to get to TX, FDX takes 3 days to FL and 3 day to get to 95% of TX, 4 days for the rest. There are similar differences in many areas of the US. I see that one area that UPS will want to do is to be able to outsource the long haul work.
Also, if you look at the rate UPS incurs to pay our drivers including pay, as well as benefits and compare it to what a FDX ground person is paid. There is a huge disadvantage. I know people won't like it, but I see a split wage tier being implemented. I realize this isn't popular, but if you look at other industries like the auto industry this has already been done to compete with auto manufacturers without the higher costs associated with the UAW.
If you look at other areas that UPS has done to cut costs, you can see where we already have done the following over the last 20 years or so:
1. Reduced the mgmt structure by reducing the amount of regions. (I agree this was overdue)
2. Reduced the mgmt structure by reducing the amount of districts (ditto).
3. Reduced staff for CSTC, it used to be every district had their own CSTC, they consolidated this and I believe but not sure, they outsourced this too.
4. Same as number 3 for other departments like Payroll, friend&A etc
5. Similar to number 3, technology has virtually eliminated jobs just as was needed for Data Processing, and Delivery Information.
6. Many areas besides consolidating districts have also consolidated divisions, so now 1 pkg division manager is doing what 2 or 3 pkg division managers used to do. Similarly, many facilities that used to have 2 center managers, now have 1.
7. Last year, there was a pay freeze for mgmt folks
8. Starting quite a few years ago, mgmt had to chip in on their medical costs. Now I pay between my share of benefits and for my flexible spending acct to cover copays over 450/month. That used to be 0.
I think that it's time for their to be some cuts on the teamster side as well. Similar to what has happened in other union industries (like UAW etc).
Now, there's been other areas that I see the unions point about how the CEO pay and other of the top Sr VP's have risen dramatically. Although I disagree in how it was done, and when it was done. They made UPS top folks receive pay closer to industry average for our Sr executives. I think most all will agree that UPS drivers get at or near the top pay compared to others in the same industry. Shouldn't top mgmt also make at or above what other top mgmt makes in other similar companies?
