Summary
FedEx is spending millions on an advertising campaign making it appear that rival UPS is accepting money from the federal bailout of banks, which is clearly is not the case at all. The campaign even includes a "bailout-o-meter" on a FedEx-sponsored Web site, Brownbailout.com. How much of this is over-the-top hype? Or is it just fair game between two rival small package delivery giants bent on winning each other's market share and driving up their costs?
Analysis
In this corner, century-old UPS, the $50 billion-a-year small package giant with a largely Teamsters-covered work force with a button-down management team and all those wonderful unionized workers driving those ubiquitous brown package vehicles.
In the other corner, 40-year-old FedEx, a worthy $38 billion-a-year challenger with a staunchly non-union work force headed by CEO Fred Smith, driving those nifty white, purple and orange trucks.
Both camps do exactly the same thing: traverse this country and the world delivering small packages and envelopes, as well as heavier freight, with stunning service levels and reliability with costs that range anywhere from highly competitive to out-and-out crazy (such as the ability to use "next-flight-out" chartered services to keep those assembly lines humming).
Here's the gist of FedEx's latest advertising campaign: make it look like UPS is somehow accepting federal bailout money.
Here's the issue: A bill just passed the House of Representatives, with UPS's lobbying help, that would transfer non-union FedEx's labor relations to fall under the National Labor Relations Act, rather than the Railway Labor Act, which currently governs FedEx operations.
By making it appear that UPS is doing this only to raise FedEx's labor costs, FedEx is countering that this is akin to accepting a federal bailout, a la AIG and all the rest of the Wall Street crowd.
It's a reach of which 7-foot Wilt "The Stilt" Chamberlain would be proud.
Such a reclassification, FedEx fears, would make it must easier for unions to gain a foothold in the company, particularly its small-package home delivery unit, which currently utilizes non-union owner-operators. Except for its airline pilots, FedEx is union-free, and quite happy that way.
Making it appear that somehow this translates into UPS accepting millions of dollars in federal bailout money is a stretch. In fact, UPS officials say, it's an out-and-out lie.
"FedEx is appearing to spend millions of dollars to convince Congress that a FedEx driver delivering a package is different from a UPS driver delivering a package," UPS spokesman Malcolm Berkley tells the New York Times.
In fact, Berkley is 100 percent right. Both companies perform exactly the same jobs. Although neither company will admit it, both companies copy each other's business plans to a tee. If UPS buys a heavy truck long-haul operation, FedEx does exactly the same thing less than a year later. If FedEx buys a consumer mail box operation, UPS does it before the next year is out.
The only difference is this: FedEx does it with a non-union work force. UPS is covered by the Teamsters, and has for more than 100 years.
UPS is the largest and fastest-growing employer of the 1.4 million-member Teamsters. In fact, the Teamsters are some of the best lobbyists UPS enjoys in Washington.
Ken Hall, the Teamsters package division chief, calls the FedEx ad ploy "laughable," and he's probably right. The Teamsters rarely mince words when it comes to FedEx, which it has been trying to organize for more than 20 years.
Under the Railway Labor Act, unions need to organize a company completely at all its locations. At a transportation company like FedEx with more than 1,000 terminals and outlets, that is nearly impossible. If it were to move under the National Labor Relations Act, FedEx terminals could be organized location by location. This is exactly what happened at the old Overnite Transportation Co., now part of UPS Freight, which has effectively become unionized under UPS's ownership.
This is the kind of scenario that keeps FedEx founder and CEO Fred Smith awake at nights. He fears that being a Teamster operation would raise costs and chase customers away. He may well be correct.'
In a recent press release, the Teamsters called Smith "arrogant" for his "campaign of threats and retaliation." Smith has threatened to cancel a $10 billion contract to buy several dozen Boeing 777 planes if the company were to be moved under the NLRA.
Experts in labor and advertising are split over whether the highly public FedEx gambit works. Fred Smith has had some great ideas in the past, such as taking on the sleepy U.S. Postal Service some 40 years ago. He's also had some clunkers, such as Zapmail (a service that flopped when facsimile machines became ubiquitous) and, most recently, the purchase of Kinko's for more than $1 billion. Kinko's unit, since rebranded FedEx Office, has never turned a profit for its parent company.
One advertising expert quoted by the Times, Steve Centrillo of A-Team Advisors, says he gives FedEx points for "inventiveness," which is an interesting term. In ad-speak, does that mean "lying?"
No, of course not. But Centrillo did say that the use of the word "bailout" when connected with UPS is "the most questionably ethical" thing involved here.
My prediction: this ad campaign doesn't last the summer.
