Why UPS Stock Is Down Today
What happened
The Teamsters union says negotiations with United Parcel Service (NYSE: UPS) over a new contract have "collapsed," raising concerns that there will be a strike later this summer. Investors are taking the threat seriously, sending shares of UPS down as much as 3% on Wednesday morning.
So what
A contract between UPS and Teamsters-represented employees expires at the end of this month, putting the future of about 340,000 employees in doubt. The two sides have been saying for months they want to reach a deal, but workers have already authorized a strike should the talks break down.
There is a lot at stake for both sides. The union argues that workers missed out on wage increases during the pandemic, and it's hoping to take advantage of widespread labor shortages to negotiate a better deal for its members. UPS, however, is caught up in a cutthroat battle with archrival FedEx and transportation and logistics newcomers including Amazon, and is keeping a firm eye on its costs.
Early Monday, the Teamsters announced via Twitter that a negotiation session had collapsed overnight because UPS "walked away from the bargaining table."
"Following marathon negotiations, UPS refused to give the Teamsters a last, best, and final offer, telling the union the company had nothing more to give," the Teamsters said.
Now what
The company countered that it was the Teamsters who stopped negotiating "despite UPS's historic offer that builds on our industry-leading pay," and encouraged the union to return to the table.
"Refusing to negotiate, especially when the finish line is in sight, creates significant unease among employees and customers and threatens to disrupt the U.S. economy," the company said in a statement. "Only our non-union competitors benefit from the Teamsters' actions."
The good news is the two sides still have nearly a month left to negotiate, so there is still time to work out a deal. But there is clearly a lot of acrimony to work through.
The last time UPS dealt with a major strike was in 1997. That work action lasted 15 days and cost the company an estimated $850 million. A strike can also alter the flow of traffic, which would leave UPS scrambling to win back the clients who turn to other services during the stoppage.
Given all that is at stake, some investors appear to be headed to the sidelines while this plays out.
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