The union is being left behind in the modern economy, but it could cause damage in the few places it still has power.
The union is being left behind in the modern economy, but it could cause damage in the few places it still has power.
M ajor disruptions to shipping might be on the way. As I’ve written about before, UPS is in an especially contentious round of negotiations with the Teamsters Union, which represents about 340,000 UPS employees. The Teamsters have already voted to approve a strike if no deal is reached before the current contract expires on July 31, and they set a deadline of today to reach a new pay-rate deal.
On top of that, less-than-truckload (LTL) carrier Yellow might go out of business this summer. Yellow is the third-largest LTL carrier in the country and has been struggling for years. Unlike most LTL carriers, it is unionized, with about 22,000 Teamsters members as employees. The nearly century-old company contains multiple regional carriers with overlapping operations, and a consolidation plan that started before the pandemic sought to make the company more efficient.
For Yellow, it’s not a strike that most worries the company. The Teamsters have opposed the consolidation plan, arguing that it violates the labor contract to which the company agreed, and have stopped meeting with Yellow entirely.
Yellow has sued the Teamsters for $137 million in damages for breach of contract, alleging that the union’s obstruction has made it impossible to run the company. The lawsuit says Yellow will be out of cash in August and will be forced into liquidation if the consolidation plan can’t be implemented.
In both cases, Teamsters obstruction would likely hurt the employees the union represents.
UPS is one of the few large private-sector employers that have a generally positive working relationship with a union, having added thousands of union jobs in the past few years while the rest of the economy continues its long-running trend away from organized labor. Torching that relationship with an economy-harming strike would increase shippers’ incentives to work with non-union FedEx and encourage Amazon, currently UPS’s largest customer, to move more deliveries in-house.
UPS will make it through no matter what happens, but Yellow faces near-certain demise if it can’t modernize. If it goes under, those 22,000 union jobs are not coming back. LTL carriers avoid unionization whenever possible. Non-union LTL carrier XPO saw one of its locations unionize with the Teamsters in 2021, but after two years of experience with union representation, drivers decertified the union earlier this month, saying that the Teamsters did not represent their concerns.
Yellow would be the largest LTL carrier to go out of business; the current record-holder is Consolidated Freightways, which went under in 2002. It was also an old, inefficient carrier with a unionized workforce. LTL carriers view Yellow and Consolidated as cautionary tales. According to data from Satish Jindel, a logistics-industry consultant, in 1993, nine of the top 25 LTL carriers were unionized, and they had a market share of 60 percent. Today, only three are unionized, and they have a market share of 22 percent.
“A lack of flexibility in staffing levels and operations that would allow unionized carriers to respond to freight market volatility means these carriers are always at a disadvantage to their non-unionized competitors,” writes Craig Fuller for FreightWaves. Yellow has tried to maintain its union identity, purchasing several trucking companies in the early 2000s and seeking to reorganize them into one national unionized carrier.
The acquisitions led to redundancies in facilities and personnel. That’s the sort of thing that gets sorted out when any company purchases another, but union work rules have made the improvements difficult. Yellow’s western region has been able to implement the changes with less interference, and the company’s performance there has improved as a result. But the rest of the country remains inefficient compared to competitors.
In the past, the Teamsters better understood that they had a stake in the future profitability of the company, and the union made some concessions. But now, under new president Sean O’Brien, it has taken a more obstructionist approach.
It’s the same shift in strategy that O’Brien has advocated with respect to UPS. It has won him a profile in the Washington Post, which described him as “a 1970s-style scrapper” with “old-school sensibilities.” But it’s not the 1970s anymore, and the logistics industry is extremely competitive. Rigid union work rules don’t fit into that paradigm.
Non-union FedEx is in the midst of a massive corporate restructuring, which the company believes will save it billions in operating costs. The trucking industry is full of small and medium-sized companies that are constantly adjusting by adding or removing capacity and routes in response to market conditions.
Flexibility is the name of the game. The Teamsters are being left behind. But their obstruction could cause damage far beyond the limits of the corporations they are upset with. A Yellow bankruptcy would punch a massive hole in the LTL market, causing rates to spike and options to dwindle for shippers in countless industries. Because UPS’s largest customers are business-to-business, it would prioritize those customers, so a UPS strike would be especially damaging to the consumer shipments that most people see day to day.
Rather than represent the interests of workers, the Teamsters are hurting the competitiveness of two of their largest employers, and the economy could end up as collateral damage.