A Second Contract Vote Fails: How UPS's Most Important Distribution Center Is at Risk

A labor contract at UPS's Worldport package center appears to be far from certain, here's why.

Apr 22, 2014 at 2:45PM

Photo: Wiki Commons

The Teamsters' Local 89 Union at United Parcel Services' (NYSE:UPS) famed Worldport Hub has once again voted down the proposed Louisville air supplement in a vote of 2804 against and 185 for the proposal. This marks the second time that the contract has been voted down, and it highlights the ongoing strain between UPS and one of the company's most important local unions.

Fred Zuckerman, president of the Local 89 Union, said that Local 89 is currently working on what options are available to negotiate, because the International Brotherhood of Teamsters, or IBT, has failed to file the necessary paperwork that would allow the union greater bargaining power and the option to strike if necessary. The IBT declined to comment on the matter.

This is confusing. What is Worldport? An air supplement? Why should I care?
To begin, if you have a vested interested in UPS you should certainly care because the Worldport package hub is its largest air center and serves as the main artery for its air operations. Almost every package shipped via UPS airplane goes through this center, and it's of the utmost importance for UPS to keep running smoothly so customers, such as Amazon.com, stay on board. 

The result of the voting shows that there are a lot of unhappy UPSers at Worldport, due primarily to contract negotiations. Periodically, UPS negotiates new contracts with it's unionized workforce that covers things like pay increases, new hires, benefits, and various other areas. 

Local 89 is unhappy with its new contract because it contains reduced health care benefits, new-hire previsions, shuttles, and other areas of contention. What's really interesting about this situation is that there appears to be a breakdown in communication between the IBT and Local 89. For example, Local 89 has repeatedly reached out to IBT for answers about the paperwork that needs to be filed for Local 89 to have more power in negotiations and the option to strike. So far they haven't received a full explanation of why this paperwork has not been filed by the union; they have received only one vague response in the last year stating that the paperwork was not filed due to "strategic" purposes.

What's the takeaway?
There seems to be a large amount of distrust at Worldport between Local 89, the IBT, and UPS, which is creating a politically charged and uncomfortable situation for the workers based there. It also appears that the local union is currently unsure if it has the option to strike and is worried that the IBT and UPS may be able to force the contract through. It's still too early for investors to tell what will come of this situation, but it is something to keep an eye on. This is an emotionally charged situation and only time will tell whether tempers flare or mediation prevails.

If you'd like a more in-depth look into these labor negotiations please watch the video below, in which I explain in detail the current happenings at UPS Worldport and what it means to investors.

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Blake Bos has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and United Parcel Service. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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