The Big Brown Machine

UPS dispute with mechanics union raises safety issues, consequences of globalization

UPS, the world’s largest parcel delivery service, lost a five-year battle with its air mechanics union earlier this month, and nobody seemed to notice.

On Oct. 6, U.S. District Court Judge John G. Heyburn denied the company’s motion to overturn an April 10 federal arbitration board ruling that prevents the $45 billion company from outsourcing certain kinds of aircraft maintenance work to cheaper, non-union foreign vendors. Per the board’s interpretation of the Railway Labor Act, which provides job protection for transportation workers, UPS — aka “The Big Brown Machine” — will revisit terms of a five-year agreement with the 1,000-member International Brotherhood of Teamsters Local 2727 aircraft mechanics union.

“The union is, of course, pleased with the court’s decision, since the arbitrator acted properly in issuing his award,” says William R. Wilder, the attorney for the Teamsters. Pay, job protection and health benefits, he says, “are the main open issues.”

Specifically, the arbitrator ruled that UPS violated its agreement with the union by allowing non-union mechanics in Taiwan to perform periodic maintenance checks on Boeing 767 aircraft. Under the agreement, the Teamsters have exclusive rights to perform this work.

“The award protects UPS mechanics against outsourcing of their work to foreign locations,” Wilder says. “That is important to protect the mechanics against any more job losses and also to help get laid-off mechanics back to work.”

The arbitration board will convene again Oct. 26-28, facilitating further talks between the Teamsters and Big Brown.

Labor pains

This isn’t the first time UPS has found itself on the losing end of labor issues. In 1997, more than 185,000 ground workers represented by the Teamsters and backed by the AFL-CIO, staged the country’s largest strike in a decade to increase wages and pension benefits for full- and part-time employees.

“What’s happening here — and it’s happening in a lot of other companies as well — we have now very high corporate profits,” former Clinton White House Labor Secretary Robert B. Reich told “Fox News Sunday” that year. “We also have very tight labor markets, and we have a long (economic) expansion in which many blue-collar workers have not seen their pay and benefits go up, and this is an incendiary combination.”

After 15 days of nonstop negotiations, the Teamsters won.

In 2004, 8,300 Canadian UPS pilots refused to fly for similar reasons. During the strike, they were supported by the Louisville-based Independent Pilots Association, which divulged that UPS had been employing non-union pilots to fly into and out of Canada to break the strike. In response, UPS spokesman Norman Black told the Associated Press that IPA was lying, prompting the IPA to divulge detailed flight information from the Federal Aviation Administration showing that 12 UPS flights had come into Canada with non-union personnel a day after the 48-hour strike had ended.

The Oct. 6 federal court ruling reflects an increased level of chafing against U.S. labor laws, the increasingly expensive U.S. laborer those laws represent, and offers a glimpse into UPS’ style of growth in the early 21st century: one that increasingly favors unfettered free trade, a reliance on political lobbying and intimidation of domestic employees.

In the last 20 years, UPS has aggressively expanded into emerging foreign markets, specifically China. These emerging markets are expected to become the company’s next great source of revenue, so it is little wonder then that the shedding of 15,000 domestic jobs (including about 150 mechanics) as a result of the 2008 recession did little to deflate UPS Chairman and CEO Scott Davis’ optimism.

“It looks like this recession is finally over,” Davis told the Atlanta Journal-Constitution on Feb. 2. “And believe it or not, that makes 21 (recessions) that UPS has successfully managed through.”

The Journal-Constitution story went on to reveal, however, that despite reporting a $1.2 billion profit in late 2009, UPS would proceed with a plan to “eliminate 1,800 positions, in part by asking 1,100 management and administrative employees to retire early” while giving $100 million in raises to 40,000 managerial positions.

“We have a saying here at UPS: Ax now, ask questions later,” says Rob Haysley, an airline maintenance technician at UPS Airlines for the past 17 years. “They make it almost impossible to follow the rules, because there are so many, but that’s by design. If they have so many rules in place they know you can’t follow, then they can pick and choose when they want to nail you on something. It’s what they do. Then a week later, they don’t give a shit about it anymore.”

Haysley has been a UPS employee since 1984, four years before UPS Airlines launched. In that time, he has seen “a lot of nastiness” in working as a supervisor, a representative of the union and now among the endangered 2727 mechanics.

He and other mechanics, many of whom spoke under the condition of anonymity, say UPS has systematically intimidated them to divide them amid pending legal action and upcoming union elections. In the process, they have jeopardized the health of employees and the potential safety of aircraft. LEO Weekly has reviewed dozens of warning letters issued by the company against mechanics for arbitrary infractions that include identifying legitimate problems with aircraft that in many cases render them unworthy for flight. LEO has also been made aware of at least one instance in which UPS management cleared a damaged aircraft for takeoff from the Louisville International Airport.

“If I noticed something wrong with an aircraft, and I go and write it up, but I wasn’t assigned that aircraft, I get a warning letter,” says one mechanic who routinely works an average of three consecutive shifts. “Two more warning letters, and guess what? I don’t have a job. I found something un-airworthy with that aircraft, but I’m being blamed for it. You don’t look so hard next time.”

The company declined to respond on this matter but was more than forthcoming in telling us how much the mechanics make — roughly $90,000 a year. Spokesman Mike Mangeot says UPS doesn’t publicly comment on personnel matters. “What I will tell you is that UPS has one of the best safety records in commercial aviation,” he says, “even allowing for the recent tragic accident in Dubai,” referring to the Sept. 3 crash of one of its 747-000 cargo planes. The crash, caused by improper storage of highly volatile lithium ion batteries, claimed the lives of two pilots, one of whom was from Louisville.

The FAA confirmed that it is investigating a November 2009 incident in which an MD-11 aircraft was struck by a loading vehicle, after which the plane flew anyway.

“The mechanic was told to ‘get off the airplane, you’re not gonna write that up, that airplane’s gonna leave,’” Haysley says. “They are in hot water (with the FAA) over that.”

The FAA has increased its surveillance presence in Louisville, which they say is common practice during labor disputes.

Nonetheless, the issue addressed by the arbitration board’s ruling — that non-union foreign mechanics cannot perform work reserved for its American mechanics union — has broad implications for UPS’ expansion into foreign countries.

“They can’t operate that way, with us owning all the jurisdiction on their (periodic maintenance) checks,” or PMCs, Haysley says. “There are so many variables they can’t plan for, and that’s why owning complete jurisdiction of those PMCs … is a huge deal. They can’t operate without any flexibility. We offered to give them some; they just wouldn’t accept it. They backed us into a corner, and they took a huge gamble. We did too … and we won. And they’re fucked.”

Two-sided spear

Every day, UPS performs a magic trick.

Two million magic tricks, to be precise: That’s roughly the number of packages and letters that Big Brown circulates by air and land to 6.1 million customers in more than 200 countries across the globe, every day. With an army of 408,000 truck drivers, pilots, package sorters, logistics engineers, data analysts and mechanics, serviced by a fleet of 100,000 delivery trucks and 600 aircraft, UPS has become a cornerstone of 21st century consumer culture, providing instant gratification with the click of a mouse.

The company has ranked 43 on Forbes Magazine’s Fortune 500 list for the last two years, reporting a $1.2 billion net profit in 2009 — the same year their stocks reached a 10-year low following the world-wide economic crisis that began in 2008.

This summer, the company announced a 45-percent increase in Asian Pacific revenues over the same period last year. By expanding into China, UPS predicts it will increase its daily amount of magic tricks from 1.8 million domestically (roughly two-thirds of its revenue source) to 7 million worldwide.

“Over the last four decades, the world has watched in awe as China has risen from a state of relative isolation to become a major player on the global stage,” Davis told China’s Xinhua News Agency in 2009.I think over the next 20 years or so, China’s domestic economy will experience significant growth beyond anything we have seen to date. This represents another tremendous opportunity for UPS as China’s need for domestic transportation and logistics services expands.”

To hear Davis explain the situation, the reason for the company’s continued success is technological adaptability. “When the telephone came along, our business became obsolete,” he said of the founders’ original bicycle messaging service in a recent speech at the University of Pennsylvania’s Wharton Leadership Conference. “We’ve continued to transform our business every time there was a new technology challenge.”

Indeed, the Wharton School offered another analysis of UPS’ growth in 2000, “The Parcel Service Industry in the U.S.: Its Size and Role in Commerce,” citing two critical reasons:

“One consists of changes in the way goods and services are produced and distributed in our economy — globalization, customized mass production, lean inventory management, rapid customer response and growth in e-commerce, among others. The other is parcel service itself, which is at the vanguard of transportation service modernization … Thus parcel service is a major element of the transportation infrastructure of the nation. It is essential for modern commerce.”

In other words, by perfecting logistics — e.g., the art of transporting a lock of Justin Bieber’s hair, a rare Beanie Baby or a used college textbook from a point of origin to a point of destination and back — UPS has emerged as a cornerstone of the U.S. economy, a pillar of the consumer spending that accounts for nearly 70 percent of our gross national product. Enabled by the Internet and a world-wide telecommunications network, UPS is a spearhead of global capitalism, able to penetrate emerging markets before actual products do.

But the edge of that spearhead is double-sided. In addition to a troubled history with its American workforce, the company is encountering criticism for its positions on human rights and climate change. Reuters has reported that the UK stock index FTSE placed UPS on its list of companies cited for unspecific human rights concerns and climate change stances, which UPS declined to comment on.

Until recently, the company forced mechanics on its smaller, two-man gateways to work overtime. “What happens is, if one of those guys goes to training, and he’s gone for two weeks, the only option they have to replace that guy is what’s called a temporary duty assignment,” Haysley says. “And they will go seek volunteers to replace you in the gateway for two weeks. Now they have to remove you from your gateway, cover you with overtime, fly you there, pay you, pay you per diem, and pay for the possibility of you getting into premium pay because of transition schedules and things like that. It’s a large expense. And so oftentimes, the cheaper route is to just take the other guy in the gateway who’s working the opposite shift and just make him do it.”

Haysley and other mechanics say that as a result of being forced to work these shifts, many mechanics aren’t allowed enough time to sleep and cannot adequately prepare themselves for the rigors of the solo shift, where one error can have catastrophic civil and criminal implications.

Grit, greed and growth

On the surface, the company’s rise from a small courier and messaging service to a multi-faceted corporate umbrella is one of classic American entrepreneurial grit. Founded in Seattle in 1907 as the American Messenger Company by teenagers James E. Casey and Claude Ryan, the company has grown exponentially. Within a decade of incorporation, American Messenger Company acquired the nation’s first Model-T delivery truck and changed its name again to Merchants Parcel Delivery, before settling on United Parcel Service, and in 2003 changing its name simply to UPS.

For a century, that growth has continued unabated, and its role as deliverer of goods has made it integral to all local economies and, thus, to the national economy.

This is especially true in Kentucky, which saw a rapid decline in its agricultural and manufacturing bases during the latter 20th century. Following a $1 billion expansion of the Worldport distribution hub at the Louisville International Airport in 2002, UPS has steadily become the state’s largest employer, with the total number of UPS employees reaching 23,360 — more than Humana Inc., the University of Kentucky and Toyota’s Georgetown manufacturing plant. The Worldport alone boasts more than 8,000 employees, 75 percent of whom receive full tuition compensation at the University of Louisville and Jefferson Community and Technical College in exchange for working the hub’s graveyard shift.

Big Brown’s reach in the nonprofit world also extends beyond higher education. In 1948, UPS co-founder Casey established the charitable Annie E. Casey Foundation in honor of his mother. The foundation’s stated goal is “building better futures for disadvantaged children and their families in the United States.” Sixty years later, the foundation has emerged as a leading financial backer for National Public Radio and many smaller nonprofits across the nation.

Yet underneath this veil of logistical bedazzlement, economic prowess and seemingly charitable corporate goodwill is another classic American entrepreneurial characteristic: greed.

In the Oct. 15, 2004, edition of the online magazine The Globalist, then-UPS Chairman and CEO Michael Eskew penned a lengthy editorial titled “The Dangers of Economic Isolationism.” In it, Eskew outlined ways for businesses to combat anti-globalization efforts that, not surprisingly, are fundamentally at odds with a company whose success depends on being everywhere, all of the time.

“I work for UPS,” the former CEO wrote, “a company that is deeply ingrained in the world economy. On any given day, you see those ‘Brown’ package cars rolling down K Street in Washington, the Champs Elysées (sic) in Paris, Orchard Road in Singapore — and countless two-lane roads around the world. Those package cars are loaded with 2 percent of the world’s GDP, believe it or not. And UPS also carries 7 percent of the U.S. GDP.”

Calling for what he branded “corporate diplomacy,” Eskew said he believed “there is no greater agent working for global peace and stability than the force of increased trade between nations,” and that business needed to do a better job of promoting the glories of international free trade.

In the meat of his editorial, the former CEO laid bare the company’s need for increased public relations efforts to promote free trade.

“U.S. business interests — and the interests of everyone who believes in free and fair trade — are in risk of losing a significant battle.

Worse, we are losing the battle here in the United States and abroad. Part of the reason is the small but vocal anti-globalization movement, which has pushed its message forward with great force and tenacity in recent years. And to be fair, some of their concerns are valid.

But in my view at least, those concerns pale compared to the benefits of free and fair trade. Regardless of how we think about these activists, we have to acknowledge the fact that we are facing a significant disconnect with the greater public. And remedying that is the real challenge that lies ahead for U.S. businesses.”

A recent Wall Street Journal/NBC News poll only confirms Eskew’s concerns. More than half of respondents (53 percent) believe that free-trade agreements (e.g., NAFTA) “have hurt the U.S.,” reflecting a significant increase over 46 percent who believed the same just a decade ago, in 1999, the year of widely publicized anti-globalization riots at the World Trade Organization headquarters in Seattle.

And because this is America, The Big Brown Machine has done what any large corporation worth its share price has done: donate gobs of money to politicians in the hopes of advancing a staunch free-trade agenda.

After Eskew’s coronation as CEO in 1998, UPS has steadily increased the amount of money it has contributed to political campaigns, spending $25 million over the last decade to influence the outcome of elections across the nation. The company’s most intense levels of spending to date occurred during the 2000 presidential election and the 2006 mid-term elections, in which Democrats wrested control of both chambers of Congress from Republicans. During the 2005-2006 election cycle, UPS contributed $1,340,309 to Republican House races — more than double the amount contributed to Democrats — including the re-election campaign of then-3rd District Rep. Anne Northup, who received $111,000 from UPS over the course of her 14 years in office.

In 2010 alone, UPS has already given about $1.5 million to mostly Republican candidates, including $6,000 to former UPS pilot Todd Lally, who is running against Northup’s successor, incumbent Democrat John Yarmuth, who has received the same amount from Big Brown.

UPS has also vastly stepped up congressional lobbying efforts, spending more than $13 million in the last two years to advance its agenda on various fronts, most notably an amendment to the Railway Labor Act that would enable FedEx employees to enjoy union representation. This would have the added effect of leveling the playing field with UPS’ top competitor, whose employees currently enjoy no union protection for FedEx to buck against.

Nothing, it seems, can get in Big Brown’s way.

“A place like Metro United Way — who they give lots of money to — do you ever think they would say something bad about UPS? Never in a million years,” Haysley says. “Do you think the local government would ever say anything? Do you think The Courier-Journal would ever say anything negative about UPS? Never. You know why? This city would go crazy. It is the provider of so many livelihoods. Look at the number of people who work here in Louisville. They want you to be in awe of what they do while they quietly do what best serves their own bottom line, and that is simply to make lots and lots of money.”