Justin Sullivan
United Parcel Service (NYSE:UPS) released a presentation on Tuesday aimed at highlighting details on the new labor contract that has been a concern to investors.
United Parcel Service CEO Carol Tome said the costs incurred by the shipping giant for the new Teamsters contract covering about 340K workers are less than the $30B in new money. The deal will increase wage and benefit costs at a 3.3% compound annual growth rate over the lifetime of the agreement, which runs until July 31, 2028. 46% of wage and benefit costs from the agreement will be booked this year.
“It’s a barbell structure where it’s heavier in the beginning of the contract,” noted Tome in an interview with CNBC. “We’ll go in the middle of the contract and it steps back down. This 46% of the cost increase happens in the first year, so imagine what the last four years of the contract are!,” she noted. Crucially, UPS (UPS) retained the ability to make deliveries on weekends, added Tome. That make the new contract a win-win-win for the union, company, and customers, per UPS.
The new contract with the Teamsters included pay raises for both part-time and full-time workers. Full-time workers will average $49 an hour. Current workers will get $2.75 more an hour this year and $7.50 an hour more over the five-year contract. Part-time workers will make no less than $21 an hour, up from a minimum of $15.50 currently.
Shares of UPS (UPS) fell sharply after the company cut guidance in early August. The stock closed on Monday at its 2023 low.