UPS Q2 profit falls 49%

The recession continued to take a toll on package shipping giant United Parcel Service Inc.

Atlanta-based UPS on Thursday said its net income for the second quarter fell 49 percent to $445 million, as revenue dropped 16.7 percent to $10.8 billion. Its net income in the second quarter of 2008 was $873 million and its revenue was $13 billion.

Earnings per share were down 48.2 percent to 44 cents.

U.S. Domestic package revenue declined 12 percent to $6.8 billion, while international package revenue decreased 23.8 percent to $2.2 billion and supply chain and freight revenue fell 23.3 percent to $1.8 billion.

Average daily volume in the U.S. Domestic Package segment declined 4.6 percent in the quarter and international export volume decreased 7.3 percent.

“The global economic environment pressured our performance, but UPS remains financially very strong,” said Scott Davis, UPS chairman and CEO, in an earnings statement. “We continue to invest in growth opportunities, even as UPSers improve productivity and help our customers manage through these challenging times. We are a company that can weather this recession, positioning ourselves well to benefit when economic recovery occurs.”

You Have to Give YRC Points for Creative Thinking

Implications
YRC Worldwide, the nation's largest trucking company which has lost close to $2 billion over the last nine quarters, is applying for $1 billion in bailout funds under the government's Troubled Asset Relief Program (TARP).

YRC Chairman and CEO William Zollars says the funds are necessary "to get the conversation started" about the company's estimated $2 billion in pension obligations to various multi-employer pension plans, including the Teamsters' Central States plan. While YRC is not a financial institution and its odds of receiving the bailout are considered slim, Zollars says it's unfair for YRC to be paying billions of pension payments when roughly half its contributions are going to workers who never were employees of YRC companies.

Analysis

Creativity is a wonderful thing. It has given us modern art, rap music, the sport of Ultimate Fighting Championship and thousands of other off-the-mainstream elements of our society.

Now comes William D. Zollars, who wants to magically change the nation's largest trucking company into a financial institution.

Zollars is chairman and CEO of YRC Worldwide, the nation's largest trucker with $8.9 billion in revenue last year. YRC has about a 20 percent market share in the less-than-truckload (LTL) sector of the industry. It has lost $1.869 billion the last nine quarters, including a pre-tax loss of $415 million in the 2009 first quarter.

YRC has admitted its losses and high debt load may cause it to run aground of its bank covenants. Those agreements state that YRC's debt cannot exceed 3.5 times earnings before interest, taxes, depreciation and amortization (EBITA).

Zollars says he plans on applying for $1 billion in TARP funds because his company is obligated to pay an estimated $2 billion this year into various pension plans.

Like most unionized trucking companies, YRC belongs to various Teamsters' multi-employer pension plans. Because more than 600 Teamsters-covered trucking companies have gone bankrupt since deregulation in 1980, YRC is in the untenable position of being one of the last surviving contributors to these multi-employer plans.

In fact, Zollars tells the Wall Street Journal in this scoop, that nearly half of YRC's annual pension contributions are going to fund workers who never worked a day in their lives at companies controlled by YRC units.

That's unfair. Hence, Zollars says, YRC deserves the bailout.

Analysts, lawyers and others who have dealt with the government in applying for TARP funds say Zollars' quest is a longshot at best. I tend to agree. After all, YRC simply is not a bank, financial or lending institution.

I do agree with Zollars that it's unfair YRC is stuck with paying for pensions of workers who never worked for his company. But unfortunately, that's how multi-employer pension plans were designed to work.

Ask UPS. The nation's largest transportation company also belongs to many multi-employer pension plans. But it saw this liability coming years ago. As a result, UPS two years ago made a decision to exit the Teamsters' largest multi-employer plan, Central States, because of the "overhang" of this liability.

As a result, UPS made a one-time payment of $6.1 billion (about half that, after taxes) to Central States in exchange for getting out from underneath its obligations to that fund. UPS could do that because that $50 billion company is profitable--even in the worst freight environment in more than 30 years.

YRC could opt to do the same thing. I estimate its withdrawal liability to be perhaps as large as $3 billion--an impossibly high figure, given YRC's precarious financial condition.

With that option off the table, YRC evidently feels it has to try the next-best thing. That's TARP.

Prediction: This will be approved the day pigs fly and Dick Cheney applies to be a fund raiser for Barack Obama's re-election bid.

I don't really believe Zollars even thinks this will fly. But as he tells the Journal, it's a way "to get the dialogue started about the pension issue."

I give Zollars points for thinking outside the box. And if it works to shave YRC's pension obligations by a substantial amount and keeps his company afloat, it was worth it.

As the 50-to-1 winner of the Kentucky Derby proved a few weeks ago, longshots do come in. At least at the race track

UPS Looking at Bailout Impact

Extending TARP to trucking industry raises questions

Transportation giant UPS said it’s studying the issue of federal bailouts for financially ailing trucking companies but wouldn’t comment directly on competitor YRC Worldwide’s request for $1 billion in federal aid.

“The bottom line is, we don’t comment on the financial difficulties of our competitors,” said UPS spokesman Norman Black. On whether the treasury department program which has so far has sent money to the banking, automobile and insurance industries should be extended to the trucking industry, “we’re still looking at that,” Black said.

UPS paid $6.1 billion to unshackle itself from its own pension liability in 2007. Industry observers said at the time that allowing UPS to exit the pension plan, which covered 240,000 union parcel workers, was part of a quid pro quo with the Teamsters that gave the union an unhindered path toward organizing UPS Freight, the company’s less-than-truckload subsidiary, through a terminal-by-terminal card check agreement.

One Wall Street analyst wondered, “If YRC is allowed to get $1 billion from TARP, is UPS allowed to get a $5.1 billion refund?”

UPS Reports Results for 4th Quarter, Full Year

UPS today announced adjusted diluted earnings per share of $0.83 for the fourth quarter, a 22% decline from the $1.07 adjusted diluted earnings per share for the same period last year. On a reported basis, diluted earnings per share were $0.25 and a loss of $2.52 for the fourth quarters of 2008 and 2007, respectively.

Reported results for the 2008 fourth quarter include the impact of a $575 million non-cash impairment charge primarily related to the UPS Freight business unit due to an extremely challenging LTL environment. Reported results for the 2007 fourth quarter included a $6.1 billion charge in the U.S. Domestic Package segment related to the withdrawal of UPS employees from the Central States Pension Plan. That withdrawal followed ratification of a long-term national master agreement with the International Brotherhood of Teamsters.

For the full year, UPS posted adjusted operating profit of $6.0 billion and adjusted diluted earnings per share of $3.50, within the range the company provided mid-year. On a reported basis, operating profit was $5.4 billion and diluted earnings per share were $2.94.

"The severe decline in economic activity around the world resulted in sharply lower package and freight volumes for UPS," said Chairman and CEO Scott Davis. "Consequently, we're making the tough decisions necessary to adapt our enterprise to today's realities. This includes changes in organizational structure, compensation and network configuration."

For example, UPS has consolidated operating districts, reduced air segments and eliminated some package handling operations. The company also announced it is freezing management salaries and suspending the match for its 401(k) plans. It did not make any changes to its long-standing defined benefit pension plans. Full Story....

UPS Starts New NASCAR Era with Roush Fenway Racing

New Driver David Ragan Poised for Victory In 2009 Sprint Cup Series Season

Counting down to the season-opening Daytona 500 on Feb. 15, UPS today announced further details of its 2009 NASCAR campaign.

A long-time fixture in the popular sport of stock car racing, UPS starts the 2009 NASCAR Sprint Cup Series season in the familiar position as a race team primary sponsor. This year, however, the world’s largest package delivery company is aligned with a new driver and team. At Daytona, UPS makes its official debut aboard the No. 6 Ford Fusion fielded by Roush Fenway Racing for rising star driver David Ragan.(See b-roll of David Ragan )

Ragan barely missed the 2008 Championship Chase, finishing 13th in points with six top-five and 14 top-10 finishes. He led the Sprint Cup Series in laps completed in a display of consistent, safe driving befitting of UPS.

In addition to its alignment with the powerhouse Roush team, the UPS on-track presence will be accentuated with dramatic new race car graphics in the brand’s signature brown hue. A new UPS 30-second TV commercial featuring Ragan also will launch in conjunction with the Daytona 500 as part of a season-long advertising campaign.

"There is a great deal of positive anticipation for the new season" said Ron Rogowski, director of sponsorships for UPS. "We have a lot of confidence in the Roush organization to field winning entries and we’re equally confident that David Ragan will be a strong ambassador for the UPS brand"

In 2009, UPS begins its 10th year as the Official Delivery Company of NASCAR and its ninth consecutive year of primary sponsorship in the league’s top-ranked Sprint Cup Series. UPS uses the immensely popular stock car league as the backdrop for marketing and sales-driven commercial activation as well as employee and customer entertainment and recognition.

"We consider 2009 the start of a new chapter for UPS in NASCAR" added Rogowski. "Race fans can expect UPS to deliver a racing program that’s exciting, with a few surprises as well"

Teamsters moving to Mokena

After what officers of the union called a 20-year search for a new home, Teamsters Local 710 will move its offices from Chicago to a Mokena industrial park.

The new building, expected to be finished by October, will house about 60 employees of the local as well as its health, welfare and pension funds.

Chartered in 1903, the local now has its offices at 4217 S. Halsted St. and originally represented drivers working in Chicago's stockyards.

"The freight industry grew as the meat industry shrank," Pat Flynn, 710's secretary-treasurer, said at a groundbreaking Thursday for the new 30,000-square-foot building.

The nation's fourth-largest Teamsters local with 14,000 members, 710 represents drivers who work for companies such as ABF, Holland, Roadway, UPS and Yellow.

The local long had studied a move to the suburbs, said Jim Dawes, the local's president.

"This is a task that has literally taken 20 years," he said.

A ZIP code search of where its members live helped identify the southwest suburbs as the "perfect location" for an office that would be more accessible to 710's members, said Flynn, a Tinley Park resident.

"Our entire membership is out in this area today," he said. "This truly is the center of our universe here."

Apart from the union employees who'll work at the office, it will be frequently visited by members looking for information regarding insurance and pension issues, Flynn said. Local business, such as restaurants, could see increased business as a result, he said.

"Our members make decent money, and we spend it pretty well, too," Flynn said.
Having the local move its offices to the village will "bring a greater level of credibility and awareness" to Mokena, Mayor Joe Werner said. Another major union, the Pipefitters, also has offices and a training center in Mokena.

The union's office will be at 9000 W. 187th St. in Corporate Corridors, a business park being developed by Tinley Park-based TCB Development. It's the third such light industrial project undertaken in Mokena by TCB, which has built about 10 million square feet of commercial space in the Chicago area, primarily in the Southland.

UPS Extends Relationship with NHRA

Will Continue to Handle Delivery Needs Of World’s Leading Drag Racing League

UPS today announced it has extended its relationship with the National Hot Rod Association as the league’s Preferred Shipping and Logistics Supplier.

"On the race track, drag racing rewards quick, safe and on-time performance. Those traits are synonymous with UPS and consistent with how we fulfill the delivery needs of NHRA race fans, officials and competitors" said Ron Rogowski, UPS’s director of sponsorship. "So UPS is extremely pleased to continue this association"

UPS has served as the NHRA’s Preferred Shipping and Logistics Supplier since the 2006 season. In other forms of motorsports, UPS will continue as the Official Delivery Service of NASCAR in 2009, when it also begins a primary sponsorship of Sprint Cup Series driver David Ragan and Roush Fenway Racing.

"We share the growing excitement leading up to the 2009 debut of the NHRA Full Throttle Drag Racing Series season" added Rogowski. "UPS is proud of its association with the NHRA and looks forward to continuing to provide excellent delivery and logistics service to all those in and around the sport"

Thousands of layoffs by DHL, ABX Air hit Wilmington, Ohio

As hard times go, this is about as hard as it gets. The single-biggest employer in these parts is laying off about 7,500 men and women.
In a town of fewer than 13,000 people. In the midst of the worst financial crisis in generations.

"It's going to test us," says Mayor David Raizk. "The numbers are frightening."

Those numbers came in a Nov. 10 announcement by Deutsche Post World Net, the German owner of package-delivery company DHL. After investing five years and nearly $9 billion, DHL is abandoning its ill-starred effort to compete in the United States with FedEx and UPS. Winding down its U.S. business will eliminate 9,500 DHL positions around the country plus thousands more here at the company's local partner, ABX Air.

DHL, which has long struggled in the U.S., said in May that ABX would likely lose business that supported thousands of workers. But the global financial crisis magnified shareholder pressure on DHL's German owner and accelerated the erosion at the No. 3 company in a three-company market, triggering DHL's exodus. Exposure to bankrupt investment bank Lehman Bros. blew a $450 million hole in third-quarter earnings at the German giant's banking subsidiary, while DHL's customers grew tightfisted amid the spreading economic malaise. Full Story Here.......

Delivery service DHL gives up American dream

Many an ambitious, long-nurtured growth strategy will be abandoned during this rapidly worsening downturn. Bravely sticking to their original plans may ultimately make heroes of a few bosses, but in most boardrooms caution is now the watchword.

DHL, the overnight-delivery arm of Deutsche Post World Net, a logistics conglomerate, is a case in point. On Nov. 10 DHL said it would shut down its express-delivery service within the United States, with the loss of 9,500 jobs.

Five years ago DHL, which had been acquired by Deutsche Post in 2001, targeted the American market with much fanfare, eager to demonstrate that it was at least equal to the two delivery giants, FedEx and UPS. This was a crucial step in the campaign by Deutsche Post's boss at the time, Klaus Zumwinkel, to create a global "one-stop shop" for delivery. (The former McKinsey consultant stepped down in February this year after a raid on his home in Cologne, and on Nov. 7 he was charged with tax evasion.)

From the start, DHL found the American market far tougher than Zumwinkel was expecting; the recent savage decline in consumer spending was the last straw. FedEx and UPS were no cozy duopoly; they competed intensely, and fought DHL's every innovation. When DHL hired the U.S. Postal Service (USPS) to do its domestic deliveries, a move that was popular with customers, FedEx and UPS immediately followed suit. Full Story..........