UPS Re-Ups With the Teamsters

Move over, General Motors (NYSE: GM  ) . United Parcel Service (NYSE: UPS  ) is movin' on up in the ranks of big companies inking at least tentative major union contracts.

In fact, the UPS pact with the International Brotherhood of Teamsters, which was reached over the weekend, stacks up as the big enchilada of U.S. labor deals. Coming 11 months before the current agreement is set to expire, it would result in average $9-an-hour boost in employee compensation over its five-year life for about 240,000 full- and part-time covered employees. That compares to an $8.75-an-hour gain earned by the union on the current contract, which expires on July 31, 2008. The new version must still be ratified by union membership.

Last week, General Motors agreed on a contract with the United Auto Workers union that covers 73,000 union employees. With rising health-care costs becoming a greater concern to large and small companies alike, the contract was noteworthy for shifting health-care liabilities to a new trust fund. General Motors will feed $24.1 billion into that fund next year. The new deal will clearly have ramifications for the other automakers, including struggling Ford (NYSE: F  ) .

The UPS agreement comes at a time of concern about the company's ability to reduce its labor costs in order to compete with rival FedEx (NYSE: FDX  ) . All in all, the new contract appears positive for the company, if only because it reduces the uncertainty that the market finds so tough to swallow.

And attention will now likely shift from UPS to FedEx's own union-resisting efforts. But while those efforts probably won't be resolved immediately, I continue to believe that, in a world of rapidly expanding international commerce, both companies enjoy key positions that should win them space squarely amid the radar screens of my Foolish friends.

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