U.S. Slowdown Feared From UPS Walkout

The screws joining U.S. commerce loosened further Tuesday as the second day of a strike against United Parcel Service of America continued to disrupt the shipment of millions of business and consumer packages nationwide.

And with no new contract talks set between UPS and the International Brotherhood of Teamsters, whose 185,000 UPS members struck the company Monday, experts began fretting that the walkout could actually slow U.S. economic growth if it lasts more than a week.

The Clinton administration also voiced its concern, even though the president has said he won’t yet get involved. Labor Secretary Alexis M. Herman telephoned leaders of both parties Tuesday, urging them back to the bargaining table.

Earlier in the day, Teamsters President Ron Carey said the union was ready to meet “any time, anywhere” to reach a settlement, and added that “there is nothing more for [UPS] to wait for.”

But UPS is “standing firm by its final offer” made Thursday, and “it’s not an issue that we’ve not been willing to talk,” said spokeswoman Susan Rosenberg. UPS also “demanded” that Teamster leaders end the strike, pending a vote on that offer by the full Teamsters membership at UPS.

Secretary Herman said in a statement that the strike’s end is “crucial” not only for the 55% of UPS workers represented by the Teamsters union, but also for “countless other businesses, workers and families” affected by the walkout.

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That’s because UPS dominates the parcel-shipping business by moving about 12 million parcels a day, with its service deeply woven into the everyday workings of economic activity. Yet UPS handled only 10% of its normal volume Monday, using managers. “We don’t think it’s going to be any better” Tuesday, Rosenberg said.

Companies as big as Eastman Kodak Co. and as small as the corner flower shop rely on UPS to run their enterprises smoothly. UPS itself claims to “handle” 5% of the nation’s entire gross domestic product, which measures the value of all goods and services the country produces.

But with UPS handling just one-tenth of its normal volume, commerce was put to the test again Tuesday, as businesses, schools and hospitals scrambled to get at least some of their packages aboard the trucks and planes of rival couriers such as Federal Express Corp., Burlington Air Express and the U.S. Postal Service.

Consumers also had to endure delays for products they’d ordered, including cellular telephone equipment, fabrics, swimming goggles, apparel and countless other goods.

Catalog giant Spiegel Inc. waited 24 hours before deciding Tuesday to shift its “tens of thousands” of daily shipments to the Postal Service from its main distribution hub in Columbus, Ohio, said Spiegel spokeswoman Allison Scherer.

“This had never happened before,” she said. “We didn’t know whether the other delivery systems would be able to handle the strain of additional volume, so we didn’t want to immediately divert our shipments into an unknown.”

Kodak, one of UPS’ largest customers, is “doing what we can to divert” shipments to other carriers, but is only shipping priority items among the film, chemicals and other supplies it delivers daily, said spokesman Paul Allen at Kodak’s Rochester, N.Y., headquarters.

“We’re trying to be careful and not overload any of” the other shipping agents, he said.

Even so, FedEx and the other shipping firms labored to handle the growing surge of business.

“We’re stretched,” said Federal Express spokesman Jess Bunn. But “at this point, it’s manageable” because FedEx has been leasing extra trucks and jets to accommodate the extra orders, he said.

He said some FedEx pilots had canceled vacations, and other employees had volunteered to work extra hours.

But it’s commonly accepted that FedEx and the others could never handle all of UPS’ normal business, and that’s what leads observers to worry about potential damage to the economy.

“There’s about a seven-to-10 day window [when] this disruption could not have a major impact on the economy,” said Stephen Roach, chief global economist at Morgan Stanley Dean Witter & Co. in New York. “But certainly anything beyond that window would have a major effect on the whole pace of the economy this summer.”

Gary Schlossberg, senior economist at Wells Fargo & Co. in San Francisco, agreed that the strike could have “a material effect” on the economy if it continues for several weeks. “But my guess is the president would step in before that point,” he said.

Indeed, the UPS walkout underscores how one of the most popular recent trends in American business--the use of “just-in-time” deliveries that help businesses save cash by not having to stockpile extra supplies--is dependent on the cooperation of firms such as UPS.

“These kinds of services are a critical link” in keeping the economy humming, especially because so much of U.S. retailing now involves direct marketing, said F. Stan Settles, a professor of industry at USC.

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With millions of consumers now dialing their telephones to buy products that are then shipped by UPS, the company “is far more critical than, say, the railroads were in the past,” he said.

Big manufacturers such as auto companies aren’t likely to be hurt because they and their suppliers have their own trucking fleets, said Joseph Blackburn, professor of operations management at Vanderbilt University in Nashville.

“But there’s lots of industries--consumer electronics and computers, for example--that use UPS to get some of their high-value components” needed to manufacture their goods, he said.

“The whole business is entirely dependent on reliable shippers and suppliers,” Blackburn added. “If you don’t have that chip, you can’t put a computer together.”

Experts noted, however, that companies using “just-in-time” production techniques can still operate for a few days with interrupted parts shipments, because they typically keep more than one day’s supply of components on hand.