UPS earnings drop 56 percent

As Sandy Springs-based UPS ships fewer packages because of a shrinking world economy, the company has taken to asking its labor force — represented by the Teamsters union — for help.

“It’s like cats and dogs living together,” joked Chief Financial Officer Kurt Kuehn on Thursday after the company released its first quarter earnings. “What’s next?”

Jokes aside, the relationship is formal — and Kuehn said valuable — as part of an ongoing effort to get labor buy-in for UPS ideas to grow market share and services. CEO Scott Davis mentioned the “competition committee” in an earnings call with Wall Street analysts. The committee is made of senior UPS and Teamster executives and meets regularly.

On Thursday, the company reported first-quarter revenues declined 13.7 percent to $10.9 billion. Profits for the quarter dropped nearly 56 percent to $401 million, underscoring why UPS needs fresh ideas and labor support behind them.

Kuehn and Davis credited the committee with helping the company gain a 50 percent share of rival DHL’s U.S. revenues after the European company dropped its domestic delivery service in the United States.

Through the committee, the Teamsters agreed to ask Big Brown’s drivers to pass out fliers to customers about the DHL exit.

Still, there is more to be done as UPS saw its U.S. average package delivery volume drop 4 percent to 12.7 million packages a day, despite picking up DHL business.

The company reduced its U.S. labor force by about 10,000 workers last year, bringing UPS’s domestic workforce to roughly 355,000, Kuehn said.

Kuehn said drivers participate actively to grow sales leads already. The committee is a “combination of coordination, brainstorming, and asking, what else can we do?”

A Teamsters’ representative briefed on the matter was not available to comment.

But Satish Jindel, president of transportation firm SJ Consulting in Pittsburgh, said, “There is no hard work” in asking drivers to help with sales. “They’re already there with the customers and it doesn’t hurt to create more brand awareness. It’s also in the interest of the union to help with it and ensure they don’t have layoffs as the volume declines,” he said.

According to Jindel’s firm, in the first quarter UPS still had the largest share of the U.S. air and ground market, or 53.6 percent. That is a 4.6 percent change from the first quarter last year. FedEx has 33.2 percent, a 7.4 percent change, and the U.S. Postal Service a 13.2 percent share, or a 5.6 percent change. DHL in the first quarter of last year had 5.3 percent of the market but is no longer in the chart.

For the first quarter, UPS earnings were 40 cents a share. UPS’s second quarter earnings forecast is 45 to 55 cents per share. The company said that the U.S. economy could see a recovery by the end of this year or early next year, but that the second quarter would be tough.