UPS to halt pickups for heavy items before vote on contract offer

LOS ANGELES (Reuters) - United Parcel Service Inc UPS.N has warned customers it will stop picking up shipments of heavy items next Wednesday to avoid potential freight disruptions before union voting on a tentative contract ends on Nov. 11, the company said on Thursday.

FILE PHOTO: The logo of United Parcel Service is seen at the new package sorting and delivery UPS hub in Corbeil-Essonnes and Evry, southern Paris, France, June 26, 2018. REUTERS/Charles Platiau/File Photo

“Because we do not have a guarantee against a work stoppage, we cannot afford to put our customers’ volume at risk of being stranded in our system,” UPS said in a statement.

The halt in pickups for large shipments of goods bound for stores and other destinations will not affect small-package deliveries during the upcoming holiday season, said UPS, which is grappling with union issues as it works to lower delivery costs associated the surge in online orders from AMZN.O and others.

UPS wrapped up contract discussions with the Teamsters National Freight Industry Negotiating Committee on Oct. 25. The union has already authorized a strike if members vote “no” on what UPS has said is its final freight division contract offer.

On Oct. 5, UPS freight workers rejected an earlier contract offer. An extension agreement is set to expire on Nov. 12.

A strike by the 12,000 Teamsters covered by the freight contract would be the first at UPS in more than two decades.

Freight accounts for a small portion of the business at UPS, limiting the impact of a strike. The Atlanta-based company had third-quarter freight revenue of $867 million, compared with U.S. Ground revenue of almost $7.5 billion, according to a regulatory filing.

“The freight division is a low margin business for UPS, so even the shareholders will not be concerned much,” said Satish Jindel, president of ShipMatrix, a shipping consultancy. He added that the U.S. trucking shortage would enable UPS to quickly regain most of the business after a strike.

The freight contract skirmish lands just weeks after the Teamsters ratified a five-year agreement for parcel delivery workers. Fifty-four percent of members voted against that deal, but turnout was so low that union rules required a two-thirds “no” vote to reject it.

“We would not expect the parcel division to formally join any labor action,” Bernstein analyst David Vernon said in a client note.

Vernon added, however, that “some drivers in pockets of the country unhappy with the parcel contract ... (could) take it out on the company through informal acts of sympathetic protest.”

The International Brotherhood of Teamsters represents 250,000 UPS employees.

Reporting by Lisa Baertlein in Los Angeles; Editing by Peter Cooney