FedEx (FDX) hopes to harness taxpayer ire sparked by the word "bailout" to kill legislation in Congress that would help nearly 100,000 of its workers to unionize more easily. FedEx argues the bill would hobble it with higher costs and less reliability across its network and represents unfair government aid for its chief rival, UPS (UPS).
The dispute involves the FAA Reauthorization Act of 2009, which contains a provision that would change the labor law covering FedEx workers. Language introduced in the bill by U.S. Representative James Oberstar (D-Minn.) would subject FedEx workers to the same rules as those performing similar work for Atlanta-based UPS. The measure affects employees of FedEx Express, which along with FedEx Ground, FedEx Freight, and FedEx Office comprises FedEx, but not the status of FedEx Express workers who are air-based, such as pilots and airplane mechanics. The bill passed the House on May 21 and is now in the Senate, where a similar House measure failed in 2007.
FedEx's campaign, dubbed "Brown Bailout," debuted June 9 online and could be followed by television and print ads. The company wants consumers to complain to their senators about the legislation. On Brownbailout.com, the FedEx campaign's Web site, a man in front of a whiteboard describes "getting a government bailout" in a manner similar to UPS' "Brown" marketing campaign. After stating that UPS is struggling to compete with FedEx, which ships a higher percentage of its parcels by air, the man says, "So what do you do? Well, you could try to improve your own business…well, that's hard work. Instead, how about slipping a few words into an important government bill that gets you a bailout?" He uses his marker to turn the S in UPS into a dollar sign. "We're doing it right now, but shhh…don't tell anybody."
Resisting NLRA Jurisdiction
Here are the details: The legislation seeks to remove a distinction between how UPS and FedEx Express must deal with employees. Because FedEx was originally founded as an airline, FedEx Express workers are currently subject to the Railway Labor Act (RLA), a law passed in 1926 to prevent disruptions to national air and train traffic. Though many FedEx Express workers don't have a direct relationship with the operation or maintenance of the air fleet, they are still covered by the RLA. That law carries a difficult path to unionization that requires a national vote by every worker at a company, and doesn't allow for organizing at a local, terminal-by-terminal level. Since the late 1990s, UPS and the International Brotherhood of Teamsters have pushed to change this classification.
The provision in the current bill would remove FedEx Express drivers from the jurisdiction of the Railway Labor Act, and put them under the National Labor Relations Act. The NLRA covers most private-sector workers in the U.S., including delivery drivers, truck mechanics, and workers at sorting facilities both at UPS and at FedEx Ground, a sister unit of FedEx Express. "FedEx has managed to use the RLA to keep workers from organizing," says Jim Berard, a spokesman for the House Transportation Committee. "This bill puts FedEx on the same footing as UPS." The Teamsters union is pushing for the bill as a way to create what it calls a level playing field for workers at the two companies.
FedEx spokesman Maury Lane argues that a change could impair FedEx Express' system dependability and would boost customers' shipping costs. The measure is also unfair to FedEx, he says. "This effectively bails UPS out because they entered a bad labor agreement," Lane says. "They want Congress to fix a labor agreement they can't afford."
Boeing Orders Hang in the Balance
A UPS spokesman, Malcolm Berkeley, says it is only fair that FedEx and UPS employees should be covered by the same labor laws. UPS has lobbied Congress for the provision. "FedEx is preparing to spend millions of dollars trying to convince Congress that a FedEx driver delivering a package is somehow different than a UPS driver delivering a package," Berkeley said in an e-mail. "The packages aren't delivered by airplanes, and we don't believe FedEx can fool Congress about that."
Twice in the past three months, in testimony by FedEx CEO Fred Smith before Congress and in a filing with the Securities & Exchange Commission, Memphis-based FedEx has said its future Boeing (BA) 777 jet orders are contingent upon its workers remaining governed by the RLA.
The political spat in Washington comes at a time when both companies are facing serious financial troubles amid the global recession. In its latest earnings announcement, FedEx said revenues in the quarter ending Feb. 28 fell 14%, to $8.14 billion, with income plunging 72%, to $182 million. FedEx Express was a particularly dark spot, where operating profits dropped 90%. Meanwhile, at UPS, revenue in the quarter ended Mar. 31 fell 14% to $10.9 billion, with operating profits down 20%, to $718 million.