Finance and Economic

The 1,400 U.S. mechanics who maintain United Parcel Service Inc’s worldwide fleet of 263 aircraft will hold a strike authorization vote next week, on the cusp of the company’s peak shipping season.

Should investors or customers care?

It depends on whom you ask. UPS, the world’s largest package delivery company, says the vote is meaningless. The union, Teamsters Local 2727, disagrees — and at least one analyst thinks a walkout is possible, though he says a strike like the one that crippled UPS in 1997 is highly unlikely.

“If the mechanics go out,” David Ross, an analyst at Stifel Nicolaus, warned in a recent note to investors, “it could potentially disrupt activity heading into company’s busiest shipping period … and could have a material impact on near-term financials.”

Atlanta-based UPS insists the September 14 vote is just a negotiating feint that will not affect contract talks with the machinists, which began in October 2006 and continue under the supervision of a federal mediator.

It points out that more talks are scheduled for late September, a sign the process is far from deadlocked. And until the talks officially break down, and the union endures at least one cooling-off period, a strike — even one authorized by members — would be illegal.

“This strike vote basically is a union show of solidarity,” said UPS spokesman Mike Mangeot. “It’s contract posturing and it has absolutely no legal significance whatsoever.”

PLAYING WITH FIRE

But Local 2727, frustrated by what it claims is an impasse on central issues and emboldened by the new pro-labor occupant in the White House, insists the vote is deadly serious.

Its president, Bob Combine, warns UPS is “playing with fire” by thinking otherwise. He raises the specter of 1997, when a two-week walkout by ground-side workers cost UPS $850 million and sent customers to rivals. Some never returned.

“This is not a ploy,” Combine said. “This most certainly could result in service failures during their busiest time of the year … This thing may go sour in a hurry.”

Analyst Ross thinks the strike threat is remote but real and that UPS, which is expected to make $1.9 billion this year, according to Reuters Estimates, “is not in the best bargaining position.”

“They could double all the mechanics’ salaries and it would not affect earnings at all,” Ross said of the dispute, which revolves around healthcare costs and the offshoring of routine maintenance work more than pay.

TIMELINE IN DISPUTE

So if the mechanics, who maintain the airplanes that move about 16 percent of the 15.5 million packages UPS handles on an average day, authorize a strike, could the workers walk out during the company’s peak shipping season? 

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