A U.S. retail industry group on Wednesday urged United Parcel Service (UPS.N) and the Teamsters union to reach a labor contract deal and avert a strike that could result in billions of dollars of economic losses.
The world's biggest package delivery firm and the International Brotherhood of Teamsters have until midnight on July 31 to reach a contract deal covering some 340,000 workers that sort, load and deliver packages in the United States.
A key sticking point in the talks is pay increases for experienced part-time workers who are making roughly the same or even less than new hires because starting wages jumped due to the labor shortage in the last few years.
If a deal is not done by the deadline, UPS workers have vowed to strike.
Any disruption to the business of UPS would be broadly felt because the company handles about a quarter of the parcel shipments in the United States - including deliveries for online retailers like Amazon.com (AMZN.O), high-value prescription drugs for doctors and hospitals, and inventory for millions of other large and small businesses.
A 10-day strike could cost the U.S. economy more than $7 billion, according to a recent estimate from Anderson Economic Group.
"Even the most robust planning won't shield retailers or consumers from the impact of shutting down a key component in the supply chain as we head full-steam into back-to-school and then holiday shopping seasons," the Retail Industry Leaders Association (RILA) said.
Regardless of the outcome, UPS customers may face higher shipping rates.
"A new Teamsters deal could drive cost per piece (about) 2% higher than current expectations," Susquehanna analyst Bascome Majors said in a client note this week.
Shippers will end up absorbing that extra cost, said Alfredo Ortiz, CEO of the Job Creators Network, a conservative advocacy group started by Bernie Marcus, the co-founder of Home Depot (HD.N).
"It gets passed on to customers. That's what we're really concerned about," Ortiz said.
