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What do you do when asked to make an argument that, on its face, is obviously a loser? This week, FedEx (NYSE: FDX ) gave us the answer: Change the argument.
Over in Congress, Senators are debating the "FAA Reauthorization Act of 2009" (FRA). It's a snore of a title if ever I read one -- but for FedEx, this bill could be a game-changer. Congress has included in the FRA a provision shifting part of FedEx's business from regulation under the Railway Labor Act (RLA) to regulation under the National Labor Relations Act (NLRA).
Am I losing you? Sorry, let me cut to the chase. If the FRA fails, nothing changes for FedEx. But if the law passes, FedEx workers will find it easier to unionize. And in theory, if they do unionize:
- FedEx's labor costs could rise as workers demand better compensation, and
- FedEx operations could be hurt by strikes if negotiations break down.
Now, there are caveats and details to the argument, of course. For example, FedEx workers can already unionize under the RLA, but it requires a nationwide vote. And only part of FedEx would be switched to NLRA jurisdiction under the law. But basically, from FedEx's point of view, it's law fail = good, law pass = bad. And FedEx is even threatening to cancel a 30-plane order from Boeing (NYSE: BA ) worth more than $6 billion if it does pass. Simple as that.
FedEx, however, would like to muddy the waters a bit. Earlier this week, the company launched a public relations campaign assailing not the bill per se, or the legislators who sponsored it (never bite the hand you're lobbying), but rather a key beneficiary of the legislation: Archrival UPS (NYSE: UPS ) .
You can get FedEx's perspective on its new website, brownbailout.com. But the gist of the argument goes like this:
- Americans are sick of hearing about the bailouts of GM (NYSE: GM ) and Chrysler, AIG (NYSE: AIG ) and Citibank (NYSE: C ) . Because these efforts were led by the government, and the FRA is as well, FedEx wants to characterize the legislation as a sort of "bailout" -- even though no taxpayer dollars whatsoever are involved.
- The FedEx unit targeted by the legislation, FedEx Express, moves its packages primarily by air, and therefore should be regulated by the Railway Labor Act (which covers both air and rail transport).
- In addition to taxpayer outrage, FedEx is banking on fears that passage of the law will lead to rapid unionization, to labor strikes, and packages not getting where they're supposed to, when they're supposed to.
Now, to my mind, a "bailout" isn't a bailout until someone in Congress tries to pick my pocket and give the money away. And as far as the FedEx being an airline, well, you can't pick up and deliver packages along the last mile without trucks.
On the other hand, I do see a risk that easing unionization at FedEx will raise the risk of a transport strike eventually happening -- but even this fear may be overblown. Asked about FedEx's assertion, International Association of Machinists VP Rich Michalski called the campaign "silly," confiding: "The truth is that we, organized labor, have not done a very good job of organizing under the National Labor Relations Act." (On the other hand, I don't hear many chuckles from executives at "struck" companies like Harley-Davidson (NYSE: HOG ) , where the IAM represents workers.)
The Foolish perspective
FedEx's fear of labor stoppages notwithstanding, the system as it stands really doesn't seem fair. From where I sit, this is a playing field in real need of leveling, and two possibilities come to mind. Either:
- UPS should be subjected to the same, less burdensome regulation that currently benefits FedEx, or
- FedEx should be subjected to the same more burdensome regulation that currently hobbles UPS.
Freedom of contract
Which do I prefer? As a Fool, I favor free markets. And therefore I also favor ... unionization. Sort of ... maybe ... it depends. To me, the concept of "freedom of contract" inherently includes the freedom of workers to join together to negotiate their contracts. If an employer treats its employees fairly, compensates them well, and so on -- no problem. Reasonable employees will not willingly pay union dues if they don't see a need for a union to defend their rights.
On the other hand, if an employer tends toward cutting salaries, for example, or eliminating 401(k) contributions, as UPS and FedEx have both done -- then by all means, workers should be able to band together and negotiate for better treatment.
Perhaps FedEx would be better off spending less cash on legislative lobbying and focus on keeping its employees happy. In which case, the whole unionization bugaboo should become moot.
FedEx already has big problems that need fixing: