[HN Gopher] UPS sells trucking unit
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UPS sells trucking unit
Author : cwwc
Score : 134 points
Date : 2021-01-26 13:13 UTC (9 hours ago)
(HTM) web link (www.themiddlemarket.com)
(TXT) w3m dump (www.themiddlemarket.com)
| cwwc wrote:
| [TEXT] United Parcel Service Inc. agreed to sell its short-haul
| trucking business for $800 million, the first substantial move in
| the "better-not-bigger" strategy that Carol Tome developed since
| taking over as chief executive officer in June. Canada's TFI
| International Inc. will acquire the unit, one of the largest
| less-than-truckload carriers in the U.S., UPS said in a statement
| Monday. The eight-decades-old operation, separate from the
| package deliveries for which UPS is known, is primarily a
| business-to-business enterprise hauling large industrial cargo in
| big trucks.
|
| Tome's plan to get lean is a change from 2005, when UPS paid
| about $1.25 billion for the trucking unit in an effort to become
| a one-stop shop for transportation services. She has pledged to
| increase return on capital investment by focusing on the core
| parcel business, brand and culture while maintaining UPS's
| dividend and investment-grade credit rating. Everything else is
| under review, Tome said in July.
|
| TFI expects the acquisition will add to earnings this year and
| will increase profit as the company improves efficiency. "This is
| the most strategic acquisition that TFI has ever done," CEO Alain
| Bedard said on a conference call with analysts.
|
| Core Business Monday's "agreement allows UPS to be even more
| laser-focused on the core parts of our business that drive the
| greatest value for our customers," Tome said in the statement.
| The Atlanta-based company will take a $500 million charge related
| to the sale, which is expected to close in the second quarter.
|
| The unit had sales of about $3.1 billion and 14,500 workers last
| year, according to a UPS presentation. It operated 6,340 tractors
| and 23,400 trailers in 197 facilities.
|
| The business, whose customers include Best Buy Co., Honda Motor
| Co. and Home Depot Inc., has a "roughly break-even" operating
| margin, according to TFI. The unit moved cargo at below market
| rates and was a loss leader for UPS so the courier could offer a
| bundle of services to customers, Bedard said. He intends to
| increase prices while retaining customers.
|
| Bedard plans to reduce costs by purchasing new vehicles that are
| more efficient and by streamlining cross-border freight between
| the U.S. and Canada, among other things. The St Laurent, Quebec,
| company, which had a market value of C$7.54 billion ($5.91
| billion) from Monday's stock surge, expects to increase sales in
| Mexico as well.
|
| "This opens a lot of opportunity for us," said Bedard, whose
| company has made more than 90 acquisitions since 2008. The unit
| will continue to provide service to UPS under a five-year
| agreement.
|
| The sale won't affect UPS's package-delivery business's
| operations and will raise the company's operating margin by 0.2
| percentage point, the courier said.
| jmclnx wrote:
| The Real Reason: "UPS is union busting".
|
| I was wondering why Amazon is moving to its own delivery service
| and why UPS is selling. I did a quick search and noticed UPS
| Tucking is unionized
|
| http://teamsterslocal638.org/local-work-sites/ups/
|
| So UPS wants to dump the union before the new US admin starts
| looking at Labor.
| mchusma wrote:
| Have friends at UPS, can confirm it's all union, and it's
| really baked into their culture.
| creddit wrote:
| The rest of UPS has a union as well. This is not the reason.
| Why make this reason up?
|
| https://teamster.org/divisions/package-division/
| athriren wrote:
| the drivers on the brown delivery vans are unionized too, as
| opposed to FedEx, which uses all contractors.
| [deleted]
| neonate wrote:
| https://archive.is/2BqHT
| MHordecki wrote:
| > (...) separate from the package deliveries for which UPS is
| known, is primarily a business-to-business enterprise hauling
| large industrial cargo in big trucks.
| AnimalMuppet wrote:
| So bought it for $1.25 billion, sold it for $800 million 16 years
| later. That's kind of painful. Of course, the execs who made the
| decision to buy it are almost certainly long gone...
| tandr wrote:
| Well, if this unit was making constant money over 16 years
| (directly and indirectly), and have paid for itself already, it
| is not a bad move.
| Aloha wrote:
| This is the former Overnite transportation business that UPS
| purchased.
|
| https://en.wikipedia.org/wiki/UPS_Freight
| mtmail wrote:
| Same article on bloomberg.com which doesn't require to login
|
| https://www.bloomberg.com/news/articles/2021-01-25/ups-to-se...
| dang wrote:
| Switched from https://news.bloomberglaw.com/mergers-and-
| acquisitions/ups-t.... Thanks!
|
| Edit: Actually, let's use the one that seems to have the least
| paywallness (https://news.ycombinator.com/item?id=25916965).
| cwwc wrote:
| here too: https://www.themiddlemarket.com/news-analysis/ups-
| sells-truc...
| dang wrote:
| We'll use that instead. Thanks!
| ardy42 wrote:
| That one's paywalled for me, too.
|
| However, from the snippet in the Bloomberg Law version, it
| sounds like this unit is separate from package delivery:
|
| > Canada's TFI International Inc. will acquire the unit, one of
| the largest less-than-truckload carriers in the U.S., UPS said
| in a statement Monday. The eight-decades-old operation,
| separate from the package deliveries for which UPS is known, is
| primarily a business-to-business enterprise hauling large
| industrial cargo in big trucks.
|
| > Tome's plan to get lean is a change from 2005, when UPS paid
| about $1.25 billion for...
| duxup wrote:
| https://outline.com/MbSU85
| mtmail wrote:
| That outline was only the two paragraphs, this outline is the
| full article: https://outline.com/bdAVGF
| duxup wrote:
| Thank you, I wonder why it only got 2 paragraphs.
| mistrial9 wrote:
| Please recall that this is the same company that "fumbled" one of
| the largest public-offerings in its day, to go "global"..
| followed years of personnel turmoil and missed goals after
| blaming the teamsters for everything
| bdcravens wrote:
| This makes sense. There's far more competition for LTL than
| parcel shipping, and usually, UPS LTL rates aren't the best. (My
| employer audits and provides contract optimization for UPS
| parcels; we also have an LTL rate shopping product)
| figital wrote:
| UPS Freight has never really been "UPS" even though they sort of
| share the same computer systems and branding. Their quality of
| service has also always been _much_ lower (at least in our
| region).
| RegBarclay wrote:
| UPS Freight was an acquisition of Overnite Transportation
| several years ago. Not sure how much real integration between
| the companies ever happened beyond branding.
| ROFISH wrote:
| As someone who ships a decent amount of freight via UPS
| Freight (six time a year, at least), the integration is
| surface level at best. Yes you can go to the unified billing,
| but freight was it's own separate section. Yes you can get
| consolidated package/freight quotes but each had it's own
| website workflow. Yes you can generate a BOL on the ups.com
| website but it was way better to use the upsfreight.com
| website. The Freight API used the same ups.com API server and
| login, but it was it's own path with it's own xml schema.
|
| It was pretty clear that the integration was, at best,
| surface level. Especially when the package reps and the
| freight reps had no clue what the other was doing, letting me
| know that it was just a siloed org.
| bombcar wrote:
| At least when I was involved in shipping you could do both
| from a UPS account - but every company doing major shipments
| has more than one shipment supplier anyway.
| saltyshake wrote:
| They once overnighted Tom Cruise' car
| https://youtu.be/Ok2NWF53bUY
| bserge wrote:
| I recently found that DHL, FedEx and UPS no longer offer express
| delivery services between the US and some Eastern European
| countries (or perhaps the whole EU) besides highly expensive next
| day air delivery.
|
| Kind of sad for me, since I used to buy a lot of stuff on various
| American websites, notably eBay of course, and ship it within a
| week with DHL or Fedex for a reasonable price.
|
| USPS/national post services are alright, but not the best. They
| take more time and lose packages more often.
|
| DHL still has express shipping from China. I wonder if this is
| directly related to the shift in production. Everything comes
| from China/Asia these days, there's nothing I can't get there,
| there's no reason to buy from the US anymore.
| rlonstein wrote:
| What countries? I recently ordered some motorcycle accessories
| from Perun Moto in Serbia (really nicely made stuff, btw) and
| they shipped DHL Express which was reasonable (about $50) and
| rather fast.
| duxup wrote:
| LTL (less than truckload) and parcel (what you probably think of
| UPS doing, individual small packages) are very different
| businesses.
|
| This wouldn't necessarily indicate anything about UPS's parcel
| business.
| sandworm101 wrote:
| So this is material on pallets, but not including household-
| type moving nor material needing specialized trailers?
| darksaints wrote:
| If you want something that is too big for a box (like crates
| or pallets) but not big enough to ship a whole truckload,
| then you ship LTL.
| dwighttk wrote:
| We build pallets of boxes to ship coast to coast. It ends
| up being less expensive, faster, and the boxes arrive in
| better condition. Our west coast customers are set up to
| receive pallets which is nice.
| [deleted]
| S_A_P wrote:
| Palletized shipping is an entirely different world. I
| recently bought an Optigan (Itself worthy of a HN discussion)
| and it was shipped on a pallet. Despite mediocre 1970s
| plastic construction it arrived alive. The shipping
| experience is hardly door to door. I had to drive to an
| opposite side of Houston in a ramshackle shipping area that
| could best be described as sketchy. That said, the folks
| working there while few were great and helped me load it up
| and get on my way... Point being I could see that UPS doesnt
| see a big future in that business. There isnt really a good
| way to last mile stuff like that cheaply.
| tyingq wrote:
| Door to door LTL with lift gates is a thing. The shipper
| has to request that specific service. Basically, you bought
| from someone that either didn't know how, or didn't care,
| to do it the right way. Compared to regular UPS/Fedex, the
| big downside is that someone has to be there when it
| arrives. They won't just leave it at your door if you're
| not there.
|
| The LTL market is ~$46B/year, and was growing prior to
| COVID. The COVID hit makes sense, as the big boys don't do
| a lot of LTL, having enough volume to do full truckloads.
| grogenaut wrote:
| I've also seen it where the customer doesn't really
| understand this shipping service. Jarvis desks have
| multiple warnings about delivering to your house. IIRC if
| you live in NYC they don't even let you chose that
| option, you have to pay $150 more for lift gate.
| duxup wrote:
| That's really a big issue. Lift gates are expensive,
| require maintenance.
|
| Rando homeowner won't understand why that's 'extra' and
| such because we're used to things being adapted to hour
| home ... not a loading dock.
| tyingq wrote:
| I believe the NYC case is somewhat unique. Lift gate is
| extra, but not $150 extra or anything near that for most
| places. Meaning the extra charge from the actual carrier.
| rjbwork wrote:
| Yeah, I ordered a power rack from Rogue last summer, and it
| got here a few months ago. We live a ways down a pretty
| narrow private road and despite talking to the UPS freight
| manager a couple of times, they kept sending full sized 18
| wheelers which would have a hell of a time coming down the
| road and turning around, not to mention probably damaging
| the road. After 3 times of them sending a full sized truck
| over the course of 2 weeks I just rented a UHaul and drove
| across the damn metro to get it.
|
| B2C freight is a bit of a shit show.
| ghaff wrote:
| I forget exactly what it was because it was ages ago but
| it was some furniture that wasn't too big or heavy but
| was apparently (at least at the time) too big or at too
| expensive to ship by normal delivery. I live at the end
| of a 500 foot dirt driveway and some big truck pulls up
| at the end. I'm not sure if they _could_ have got down my
| driveway and actually gotten back out but they sure didn
| 't want to. Ended up unpacking at the side of the road
| and I got it down my driveway somehow.
| tyingq wrote:
| Mostly palletized, but also crates...stuff like say, a pool
| table.
|
| There's also some cases where boxes over LTL makes
| sense...big boxes that are lightweight. Normal UPS and Fedex
| charge "dimensional weight", where shipping a large box
| that's light is charged by size, not weight. Sometimes that
| pushes the price much higher than LTL.
| duxup wrote:
| Generally pallets are most common, but it can vary.
| ryanmarsh wrote:
| I always thought LTL meant "load-transfer-load". Like what they
| do at LTL warehouses.
| darksaints wrote:
| That operation is referred to as crossdocking in the
| industry. Pretty silly that people would downvote you for
| that though.
| duxup wrote:
| I'm not sure why that got down voted. I kinda suspect the
| threshold for a given story and turning a comment grey is
| pretty low. That plus the horrible habit the internet has
| of down voting people who are 'wrong' is a bad combo.
| ryanmarsh wrote:
| It's worse. All my posts are quickly downvoted, no matter
| the final count they always start with a downvote. I
| think someone I pissed off is running a bot.
| jandrese wrote:
| It's just HN. This whole community is more liberal with
| the downvote button than pretty much anywhere else on the
| Internet. It tends to even out over time though. Don't
| worry about it.
| AnimalMuppet wrote:
| Might be worth shooting DanG an email. If one particular
| someone is downvoting every one of your posts, that ought
| to show up loud and clear in the database. That kind of
| behavior is not something HN wants to allow, I would
| think.
| rvba wrote:
| Is this the "MBA school of divesting so they can become a service
| company that sell brand and outsources everything"?
| [deleted]
| Ericson2314 wrote:
| That depends on whether LTL crates/pallets and parcels were
| ever on the same trucks at the same time.
| tgtweak wrote:
| I think it's closer to the "shed dead weight" theory of any
| common sense business.
|
| TFI is a machine in this space and has acquired double-digit
| numbers of regional trucking services over the last 5 years.
| They own enough of them that there is government-level scrutiny
| when they acquire a new trucking company to ensure they don't
| have more than 50% of the business in a given region.
|
| LTL trucking is a capitally intensive and margin-thin game, if
| UPS is getting a decade worth of profits of that unit from this
| deal, which they can allocate elsewhere to better effect, then
| by all means. Don't dismiss the organizational overhead of
| running such an entire division, even at the executive level.
|
| >UPS Freight generated approximately US$3 billion in revenue in
| 2020 and was approximately breakeven from an operating income
| perspective.
|
| https://tfiintl.com/en/press_releases/tfi-international-to-a...
| gowld wrote:
| If it's dead weight, why is someone buying it?
|
| Selling is different from shuttering.
| ornornor wrote:
| >UPS Freight generated approximately US$3 billion in revenue
| in 2020 and was approximately breakeven from an operating
| income perspective.
|
| 800mm for that kind of business seems like a very very good
| deal for UPS then!
| cpitman wrote:
| It looks like the value of this business unit has dropped
| though, UPS acquired their LTL operation for $1.2 billion
| in 2005. Maybe they just about broke even with the
| operating profit?
| tyingq wrote:
| It may have been a good deal to the buyer as well. Assuming
| UPS put little effort into making it profitable (likely),
| there's little risk and lots of potential upside in 3B/year
| breakeven.
| selectodude wrote:
| It is. And the business will be wound down and the excess
| business integrated into current capacity by the purchaser.
| Kind of a win/win in that way.
| hedora wrote:
| The other end of the deal is definitely the "fewer jobs, higher
| prices" school of acquisitions.
|
| They explicitly say they plan to cut operating costs and
| simultaneously hike prices post-acquisition. Some, but not all
| of the cost savings will be fuel efficiency.
|
| Saying you're acquiring competitors so you can hike the prices
| and margins of both businesses is surprisingly honest. However,
| if that won't raise regulatory scrutiny, I'm not sure what
| will.
| pasttense01 wrote:
| The basic reason is the UPS trucking is unionized and its LTL
| competitors are mostly NOT unionized. This basically resulted in
| UPS trucking having higher costs than its competitors. So it
| ended up not being profitable.
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