Summary
FedEx Corp. is threatening to cancel billions of dollars of orders from Boeing Co. if a pro-labor bill in Congress becomes law. But that is not the major point. The bigger issue is the ongoing battle between non-union FedEx and unionized UPS over what will be the new labor landscape in Washington under the Democrats and pro-Labor President Barack Obama. How far will these cargo giants go in getting their way?
Analysis
FedEx and UPS are like two longtime rivals in football who, as an ESPN announcer might say: "These two just plain don't like each other."
That much is apparent over the two cargo giants' latest food fight in Washington. Caught in the middle is the Boeing Co.
Here's the skinny: FedEx is threatening to cancel billions of dollars of cargo plane orders from Boeing over a proposed amendment to the Federal Aviation Authorization bill that was recently passed out of the House Transportation and Infrastructure Committee recently.
Although both FedEx and UPS are essentially in the same business, their approaches often are drastically different. FedEx is largely non-union. UPS already is organized, with about 240,000 of its 425,000 workers belonging to the Teamsters union.
Only about 4,700 pilots are unionized out of FedEx's nearly 300,000 workers. That could change if the Employee Free Choice Act were passed into law.
Why? EFCA would allow card check, which means only a majority of workers would have to sign union pledge cards to have a union be recognized as a legal bargaining group.
FedEx, from CEO Fred Smith on down, is staunchly anti-union. The Teamsters have been targeting the trucking units of FedEx for decades. Nothing would make Teamsters President Jim Hoffa's legacy equal that of his legendary father's more than being able to organize FedEx and bring them into the Teamsters fold.
FedEx, formed in the late 1960s, has a distinct advantage as it was formed as an airline and falls, strangely enough, under the 1926 Federal Railway Labor Act. That is designed to limit work stoppages and strikes and is generally believed to be more business-friendly than the National Labor Relations Act.
UPS, formed in 1907 as a trucking company, falls under the NLRA. UPS, which most recently had a nationwide strike by the Teamsters in 1997, is working feverishly behind closed doors in Washington to get FedEx "reassigned" to fall under the NLRA.
UPS may indeed have a point. After all, FedEx operates thousands more trucks than it does airplanes. Even some of its so-called "air freight" actually moves by truck on the ground. UPS and FedEx essentially are identical companies, albeit one unionized (UPS) and the other non-union (FedEx). They fight for the same companies, offer the same menu of services and offer the same discounted freight rates.
How this turns out will go a long way to deciding which of these giants can dominate the freight sector in the coming years.
Analysts already are downgrading FedEx. Respected freight analyst Ed Wolfe of Wolfe Research recently downgraded FedEx stock from "peer perform" to "underperform."
FedEx stock, which was flying high at more than $120 a share just a few years ago, now is selling in the range of $50 per share. Wolfe's latest research bulletin has a 52-week downside target price of FedEx at just $32 a share.
If the Employee Free Choice Act were to become law--and that is no sure thing, given the shifting sands of political Washington--even that forecast might seem rosy for FedEx.
