UPS CEO Carol Tome said the costs associated with the new contract for truckers were less than the “$30 billion in new money” requested by the union, and that the company was trying to improve the quality of the contract for investors.
This is not a “$30 billion deal,” Tome clarified on Monday. But UPS did not disclose the company’s internal estimates because it sent out a premarket statement Monday night detailing operating costs.
UPS says 46% of contract payments will be distributed in the first year. Tome described the deal as a reasonable and fair price.
“It follows the barbell model and carries most of the weight at the beginning of the contract,” Tome explained. “When the contract increases in the middle of the year, prices will also decrease. Considering that 46% of the price increase occurs in the first year, it is possible to predict what will happen in the last four years of the contract.”
He added, “These increases are very good for us, annual percentage “That’s growth of 3.3. It’s a deal we’re very happy to accept.” But it’s not just about money. While we continue to prioritize the work-life balance of our employees, we continue to deliver second-hand goods on holidays, which are important for our people. ”
Avoiding the Crisis
The collective bargaining agreement reached in July caused a decrease in performance and damage occurred. According to the analysis of Anderson Economic Group, there is a business expectation of $ 7 billion in the first 10 days in the USA.
The agreement is also another important event in the summer months. According to the terms of the UPS contract, which was achieved as a result of efforts to sign a new contract, which also included strikes in various sectors such as aviation, fire electronics, television and cinema, full-time drivers will be given a total salary and benefits of up to 100,000 TL. $170,000 in the final year of their contract. Part-time workers will begin making $21 an hour, up from $16.20.
Negotiations between UPS and the Teamsters began in April, and union officials mobilized members to support and demonstrate. In June, Teamsters union members allowed UPS to strike while negotiations continued. Several weeks later, both parties accused each other of prematurely ending the contract discussions.
Towards the end of July, UPS and the Teamsters disclosed that they had arrived at a provisional contract agreement. The union officially ratified the UPS contract on August 25th, with a remarkable turnout of 58% of members participating in the vote, and an unprecedented 86% expressing their approval for the agreement.
A Mutually Beneficial Outcome
Following the tentative agreement for the Teamsters contract, Tome characterized it as a “triple-win” situation benefiting the union, customers, and the company.
Nonetheless, UPS shares have seen a decline of over 14% since the announcement on July 25. Tome also estimated that UPS experienced a daily loss of more than 1 million packages in volume during the weeks leading up to the eventual agreement.
Tome emphasized, “We can now pursue growth with certainty. Knowing our labor costs for the next five years enables us to formulate strategies to mitigate those expenses and enhance productivity through automation, which, incidentally, we’ve retained the ability to implement.”
She underlined that the most significant advantage of the deal is for customers, especially as the holiday shipping peak approaches. According to a recent forecast from Salesforce, U.S. holiday e-commerce sales are expected to rise by 1% year over year to reach $273 billion.
UPS Adopts a Strategy Focused on Modernization
Tome remarked that the Teamsters’ negotiation represented another significant leadership challenge, comparable to her appointment as UPS CEO in June 2020, which occurred during the peak of the Covid-19 pandemic and the onset of an unparalleled surge in e-commerce.
She further explained, “In fact, we began considering this contract negotiation from the very day I joined the company. We are constantly evaluating the direction of the business and what is important for our survival. We saw this as a necessary step from the beginning. ”
Following the completion of the driving contract, Tome now turns his focus to implementing the “Better, better” strategy, which represents the next level beyond the initial “better, not better” philosophy. It is the modernization and profit optimization of the business volume and increasing staff of this transportation and logistics giant, which has been operating for more than 115 years and productivity, while the “improvement” movement will require the use of electricity, intelligence, and other technologies to expand the market.
When it comes to generative AI, the real value lies in improving customer interactions. We currently employ more than 12,000 people in customer service centers around the world, all working to contact customers who may be experiencing problems. Now imagine the impact when we introduce a “bot” into this equation that can learn from interactions and share that knowledge globally. This not only increases productivity but also improves the overall customer experience. “
UPS CEO Carol Tome clarified that the Teamsters contract wasn’t a $30 billion deal, aiming to reassure investors. The contract’s structure includes early cost increases for future gains. The agreement averted a significant crisis and economic disruption. Now, UPS is focused on modernization and customer-centric improvements, leveraging generative AI for enhanced service and growth.