The biggest American strike since 1959 could destroy UPS (UPS) and devastate the US economy.
Around 97% of UPS workers voted to authorize a strike on 16 June 2023, a Teamsters press release states.* This vote allows the UPS Teamsters National Negotiating Committee to call a strike if UPS executives do not offer a contract union members like.
Hence, a strike could begin when the current UPS Teamsters contract ends on 31 July 2023. A strike is possible because UPS/teamsters negotiations stalled on 5 July 2023, CBS reports.*
A strike could be catastrophic because United Parcel Service (UPS) is the second largest delivery service in the United States. UPS moved 24% of US parcel volume in 2022, according to the Pitney Bowes Shipping Index. Notably, UPS moved 5.2 billion packages in 2022, Pitney Bowes estimates.
The largest parcel service in the United States is the United States Postal Service (USPS), the Post Office, which moved 32% of parcels or 6.7 billion packages in 2022. Hence, 5.2 billion packages could go undelivered if UPS workers strike. This could hurt online retailers and many brick and mortar stores, because retail depends on UPS.
The US Largest Strike Since 1959
A strike by 340,000 UPS drivers could be the largest US labor action since 1959, CBS News claims.
The largest labor action in US history was the Steel Strike of 1959 when 500,000 workers walked, Statista calculates. However, a UPS strike will be the sixth-largest strike in US history.
According to Statista, the largest strikes in US history were:
1. The Steel Strike of 1959 – 500,000 workers.
2. The United Mine Workers of America Strike (1946) – 400,000 workers.
3. The Textile Workers Strike of 1934 – 400,000 workers.
4. The Railroad Shop Workers Strike (1922) – 400,000 workers.
5. The Steel Strike of 1919 – 350,000 workers.*
A Strike that could disrupt Ordinary Life
Consequently, a UPS walk off could be as disruptive as the US Postal Strike of 1970 when 210,000 postal workers struck.*
To explain, the UPS person is as much a part of everyday life in most American communities as the letter carrier. I think more Americans know their UPS guy than know their letter carrier. Many people know both the UPS person at their workplace and the one who delivers to their home.
Disruption will be widespread because the strikers will be UPS drivers. Hence, the big brown vans that are part of the landscape in many American communities will vanish.
I think a UPS strike could be disruptive because 27% of Americans make an online purchase at least once a week, Zippia estimates. Moreover, US e-commerce sales could grow to $1.1 trillion in 2023.*
Some Americans, including rural residents, depend on UPS deliveries for everyday necessities such as groceries. For example, farmers who need tractor parts, mechanics who need auto parts, and people who receive prescriptions via delivery services.
Some workplaces, including many repair shops, could shut down if UPS is not delivering. To explain, many repair shops depend on parts and tools UPS delivers. Thus, a UPS strike can hurt blue-collar workers.
A UPS Strike can Help Amazon
Strangely, a UPS (UPS) strike could help Amazon (AMZN) grow and make more money.
To explain, Amazon Logistics delivered 23% of US parcel volume in 2022, Pitney Bowes estimates.* Amazon delivered 4.8 billion packages in 2021 and 2022.
Hence, Amazon (AMZN) deliveries almost as many packages as UPS, which delivered 24% of US packages in 2022. Notably, UPS’s package volume fell from 5.3 billion packages in 2021 to 5.2 billion 2022. Conversely, Amazon’s package volume remained steady at 4.8 billion.*
FedEx (FDX) which delivered 19% of US packages or 4.1 billion parcels in 2022, could also benefit from a strike. Interestingly, FedEx’s package volume fell from 4.3 billion in 2021.*
Can Amazon and the USPS cope with a UPS Strike?
I think Amazon could handle some of UPS’s packages, but it lacks the resources to take UPS’s place. Consequently, a UPS strike could hurt Amazon. Particularly, if Amazon Prime customers cannot get the stuff they’re used to buying. I imagine some customers could cancel Prime subscriptions if they cannot get stuff fast.
A big problem could be the USPS, which could lack the resources to handle UPS shipments. Many shippers are already complaining about USPS slowdowns, Business News Daily reports.*
Moreover, delivery delays and post office closures are increasing, BestLife reports.* Postal-service suspensions are also increasing. Hence, I think the USPS cannot cope with a USPS strike. Christmas packages famously overwhelm the USPS delaying parcel delivery for weeks.* Hence, I think a UPS Strike could create Christmas in August at the Post Office.
Will Biden Intervene in the UPS Strike?
Thus, many Americans could feel the pain from a UPS strike. Hence, I predict President Joe Biden (D-Delaware) and Congress could intervene in a UPS strike, as they did with the 2022 rail strike and force drivers to accept a contract. Biden and Congress could take action because 2024 is an election year.
I cannot imagine Biden or Congressional leaders wanting to face reelection with a strike threatening thousands of businesses and hundreds of thousands of jobs. Nor do I think Biden wants to face millions of angry e-commerce customers at the ballot box.
A complicating factor will be the 1.2 million members of the International Brotherhood of Teamsters. To explain, the Teamsters represents UPS drivers. A conflict with the Teamsters could hurt Biden because there are 1,456 Teamsters locals in the USA.*
Although the Teamsters were historically truck drivers. Today’s Teamsters’ union represents everybody from public defenders to zookeepers. Notably, the Teamsters membership includes Las Vegas construction workers, newspaper workers, Pennsylvania healthcare workers, and some police officers.
Teamsters’ unions include the Brotherhood of Locomotive Engineers and Trainmen, the Brotherhood of Maintenance of Way Employees Division, and the Graphic Communications Conference Locals.*
Thus, Biden could face a nasty battle with a powerful union that could benefit his rivals Robert F. Kennedy Junior (D-California) and Governor Gavin Newsom (D-California). Kennedy is already seeking the Democratic presidential nomination and Newsom is running a stealth campaign.
However, Biden’s principal objective is victory in the fall reelection battle. In that race, Biden will need the support of middle-class voters who do not care about unions. Those voters are the people most likely to be angry at a lack of e-commerce deliveries.
Is UPS Making Money?
The strike threat comes at a bad time for UPS (UPS) because the company is making less money.
For example, UPS’s quarterly gross profit fell from $17.85 billion on 31 March 2022 to $17.386 billion on 31 March 2023. Similarly, UPS’s quarterly operating income fell from $3.251 billion on 31 March 2022 to $2.541 billion on 31 March 2023.
Moreover, UPS’s revenues are shrinking. For example, UPS’s quarterly revenues fell from $24.378 billion on 31 March 2022 to $22.925 billion on 31 March 2023. Furthermore, UPS’s quarterly revenue growth shrank by -5.96% in the quarter ending on 31 March 2023. Notably, the quarterly revenue growth rate fell from 6.42% in the quarter ending on 31 March 2022.
Consequently, UPS is generating less cash. The quarterly operating cash flow fell from $4.48 billion on 31 March 2022 to $2.357 billion on 31 March 2023. Dramatically, UPS’s quarterly ending cash flow fell from $12.208 billion on 31 March 2022 to $6.19 billion on 31 March 2023.
Thus, I think the loss of Amazon business could be hurting UPS. Consequently, a strike could do serious damage to this company.
Can UPS survive a strike?
I think UPS (UPS) can survive a strike because it has plenty of cash. For example, UPS had $9.398 billion in cash and short-term investments on 31 March 2023. However, the cash and short-term investments fell from $12.545 billion on 31 March 2022.
Yet UPS is adding value. For example, the total assets grew from $70.113 billion on 31 March 2022 to $72.189 billion on 31 March 2023. However, UPS has more debt. Its total debt grew from $21.881 billion on 31 March 2022 to $22.188 billion on 31 March 2023.
Is UPS a Value Investment?
A strike will be tough on UPS, but the company will survive. In particular, I think a strike will sink UPS’s stock price. That could be good for value investors because I consider UPS overpriced.
Mr. Market paid $185.17 for UPS on 6 July 2022 and $179.76 on 7 July 2023. I think UPS could be a good value investment at lower price because of its dividend.
UPS (UPS) has scheduled eight $1.62 dividends between 1 September 2023 and 2 June 2025. Overall, UPS shares offer a $6.48 forward dividend and a 3.6% forward dividend yield on 7 July 2023. Thus, UPS is a terrific dividend stock.
Although a strike could destroy that dividend. I think the UPS situation shows why investors need to monitor labor politics. To explain, labor unrest is widespread in the United States and threatening many companies. For example, a nasty writers’ strike is paralyzing Hollywood production.
Investors need to watch the labor situation because labor unrest could soon wreck many American companies, including UPS. I think investors also need to question many companies’ treatment of workers. It is obvious poor treatment of workers is wrecking labor relations and threatening profits at many companies, including UPS.
*https://teamster.org/2023/06/teamsters-authorize-strike-at-ups/
*https://www.cbsnews.com/news/ups-strike-teamsters-union-negotiations-stall/
*https://www.cbsnews.com/news/ups-strike-vote-teamsters-biggest-walkout-in-60-years/
*https://www.statista.com/statistics/1344019/biggest-strikes-us-history/
*https://www.zippia.com/advice/online-shopping-statistics/#:~:text=For%20more%20information%2C%20we’ve,population%20shopped%20online%20in%202022.
*https://www.cnbc.com/2023/01/14/what-its-like-to-deliver-for-amazon-in-new-rivian-electric-vans.html#:~:text=For%20now%2C%20most%20Amazon%20drivers,Benz%20Sprinters%20and%20Ram%20ProMasters.
*https://www.businessnewsdaily.com/15791-small-business-impacts-of-usps-delays.html
