Contract Negotiation with UPS Freight Costs $ 60 Million at UPS

• The process of ratifying the UPS Freight contract in the fall of 2018 has cost the company millions of dollars.
• UPS told investors Thursday that the profitability of the Q4 segment "has been reduced by about $ 60 million" due to contract negotiations.
• UPS Supply Chain and Freight finally increased its sales in 2018 to $ 71.9 billion, an increase of 7.9%.
• In November, UPS had to inform its customers of the possibility of a service interruption, contract negotiations being stopped with its 11,600 unionized UPS Freight truck drivers. The members of the UPS Freight union have largely pbaded the employment contract after months of negotiations.

At the end of 2018, UPS Freight negotiated for several months with its 11,600 syndicated truck drivers.

The contract was finally ratified, but a strike seemed inevitable in early November. UPS Freight was to release its network and contact customers "about the risk of service disruption and the need to make arrangements with other carriers," UPS said earlier.

"To protect the business of our customers, we have proactively cleaned our network," said Richard Pertez, chief financial officer of UPS, on a call to investors. "On November 12, we resumed our activities with a ratified contract and began to welcome our customers."

UPS Freight truck drivers have not stopped working, but uncertainty has reduced the profitability of this $ 60 million segment. According to Peretz, some UPS Freight customers have not returned to the company, although the "overwhelming majority" has returned.

Despite the $ 60 million failure, UPS Supply Chain and Freight increased its sales in 2018 to $ 71.9 billion, an increase of 7.9%. Peretz called the fourth quarter a "solid quarter".

Read more: UPS Freight just avoids a strike of 11,000 drivers – but not all of its employees are happy

Such a strike would probably have increased the costs of consumer goods. According to the FreightWaves industry publication, if the strike had taken place, shipper delivery times could have dropped by 5 to 10% and small and medium-sized companies would have seen their prices rise by 10 to 20%.

This would also have been the first seen by UPS for decades; 185,000 employees held a 16-day strike in 1997.

UPS Freight includes the company's less truck truck sector, where several shippers share the space of a truck to ship parcels. The sector generated revenues of $ 2.6 billion in 2017, reported FreightWaves.