By Lisa Baertlein and Priyamvada C
(Reuters) -United Parcel Service’s new five-year deal with Teamsters-represented workers will cost less than the $30 billion that was outlined by the union, executives said on Tuesday.
The contract covers about 340,000 UPS workers in the United States and will increase wage and benefit costs at a 3.3% compound annual growth rate over the life of the agreement that expires in 2028.
“Our math was certainly lower than $30 billion,” Chief Financial Officer Brian Newman told Reuters, reiterating what Chief Executive Officer Carol Tome said in an earlier CNBC interview. Both declined to attach a dollar value to the contract.
The company previously said 46% of wage and benefit costs from the agreement would be booked this year.
And while contract-related costs in the second half of 2023 are expected to be about $500 million more than UPS expected, the effect from the entire contract is “right in line” with company assumptions, Newman said.
Last month, the Atlanta-based company cut its full-year revenue and profitability targets, citing higher-than-expected labor costs as well as business lost during the tumultuous contract talks with the International Brotherhood of Teamsters.
UPS shares were down 2.4%.
(Reporting by Priyamvada C and Baranjot Kaur in Bengaluru; Editing by Varun H K, Anil D’Silva and Nick Zieminski)
