ATLANTA — United Parcel Service Inc., the world’s largest package delivery firm, on Wednesday said it was losing business to competitors as labor talks with the Teamsters stretched on with just three weeks remaining in its current contract with 230,000 union workers, a wire service reported.
UPS is anxious to avoid a repeat of the crippling strike it endured in 1997. Then, International Brotherhood of Teamsters members walked off the job in a contract dispute, shutting down UPS for 15 days and costing it $750 million in lost revenue.
The Atlanta company, whose fleet of brown trucks and jets carries more than 13 million packages a day, said the unsettled labor situation began leading to diversion of package volume to competitors in June.
UPS said, however, it was standing by its previous earnings estimate for the second quarter.
“We’ve said all along the risk of volume being diverted would increase the closer we got to contract expiration, and diversion will accelerate if there’s no agreement soon,” UPS Chief Financial Officer Scott Davis said in a statement. “It’s even more important the company and the union conclude these negotiations in a timely manner.”
U.S. domestic volume levels in April and May were running about 2 percent below prior-year levels, consistent with the economy’s general weakness, Davis said. In June, however, the volume decline was 4 percent, resulting in a total U.S. domestic volume decline for the second quarter of 2.6 percent.
UPS said it and the Teamsters had made progress over the past 48 hours of negotiations. Its statement did not elaborate.
Teamsters spokesman Bret Caldwell said progress had been made but the parties remain “at a crossroads” over pension and health care benefits. Wage issues are also unresolved, he said.
“The loss of volume should serve as a warning to the company that they need to put across a serious offer,” Caldwell said.
In mid-June, the company said it was “getting close” to a new labor agreement. The current contract expires on July 31. In May, union members agreed to strike if necessary, although Caldwell said a strike date would not be set until closer to the contract expiration.
Despite the falloff in shipment volume, UPS said it still expects to post earnings per share of 50 to 55 cents, consistent with previous estimates.
Wall Street analysts on average are looking for UPS to earn 54 cents per share in the second quarter, according to research firm Thomson First Call. A year earlier it earned 55 cents per share.
In trading on Wednesday ahead of the market’s open, UPS shares were $3.01 higher at $63.75 on the Instinet electronic trading network.
Late on Tuesday, UPS and six other U.S. firms were named to replace seven foreign companies as components of the S&P 500, a key measure of how U.S. stocks are performing.
Stocks added to the S&P 500 often get an initial boost as institutional investors who manage funds that track the index buy shares in the new components, bumping up demand for the stocks.