Updated from 9:59 a.m. EDT
More on FDX Wall Street Confidential Podcast, June 17Dividend.com: Midday UpdateCramer: FedEx Hurts, Buy These StocksGreen Shoots May Be WeedsCramer's Take on Headline StocksDividend.com: Morning PlaybookFedEx Delivers Tepid ForecastWednesday's Headlines: FedExUPS CEO Rails Against ProtectionismTop Takes From RealMoney Market Activity United Parcel Service Incorporated Shares| UPS DOWNAn edgy FedEx(FDX Quote) media campaign, opposing a change in the company's labor classification, may outrage some people and amuse others, but the truth is it barely matters what the public thinks. The campaign is aimed at the 100 members of the U.S. Senate, who are about to consider legislation that would alter the classification, potentially making it easier for unions to organize.
In last-minute maneuvering in 1996, the Senate agreed, despite fierce opposition, to codify FedEx's designation as a Railway Labor Act company, which makes labor organizing more difficult. Now FedEx again needs the Senate's help.
Oddly, the focus of FedEx's attention is competitor UPS(UPS Quote). In general, UPS has a positive image, unlike payday lenders or AIG, raising the question whether any benefit accrues from attacking it. Yet in its campaign, viewable at brownbailout.com, FedEx maintains that UPS is seeking a bailout in order to limit competition.
Unlike FedEx, UPS falls under the National Labor Relations Act. The NLRA enables workers to organize on a location-by-location basis, while the Railway Labor Act requires companywide employee voting, which is more challenging for unions. UPS says it has lobbied for but did not initiate the change in FedEx's status.
The FedEx campaign is "preposterous," says Ken Hall, director of the Teamsters Package Division. "It doesn't pass the smell test. They're trying to play this as a bailout for their competitor because they don't have a good argument on the merits."
Hall, who is lobbying senators, says the campaign may backfire. "FedEx is acting as if the Senate owes them this, and a lot of senators are not impressed: they are offended," he says. "They are saying they will not be intimidated." So far, Hall says, he has talked to about a half dozen Democratic senators, some traditional labor backers and some middle of the road. He plans to contact every senator.
Yet while UPS may be an iconic company, FedEx spokesman Maury Lane says its conduct raises questions. "Why UPS has to go to Congress to ask for legislative help, a legislative bailout, is highly questionable," he says. "And if they object to the term 'bailout,' they shouldn't be asking for special favors."
More on FDX Wall Street Confidential Podcast, June 17Dividend.com: Midday UpdateCramer: FedEx Hurts, Buy These StocksGreen Shoots May Be WeedsCramer's Take on Headline StocksDividend.com: Morning PlaybookFedEx Delivers Tepid ForecastWednesday's Headlines: FedExUPS CEO Rails Against ProtectionismTop Takes From RealMoney Market Activity United Parcel Service Incorporated Shares| UPS DOWNLane says the media campaign "is meant to educate taxpayers, consumer and members of the Senate who may not know the potential impact of what is contained in the House legislation. There have been no hearings or public input regarding the unintended consequences, so we thought it was important to have a discussion." Is the campaign working? "There's no question it is driving an important debate," Lane says. "We are pleasantly surprised by the amount of positive feedback we are getting from customers and taxpayers who agree with our position."
FedEx is well known as a politically connected company, successful at lobbying and getting what it wants, which is what happened in 1996.
At the time, the Interstate Commerce Commission had just been dissolved, replaced by the Surface Transportation Board, and regulation of the affected industries was on the table. Somehow, in a House bill, the term "express companies" was left off the list of industries to be covered by the Railway Labor Act. While Lane calls the omission "a clerical oversight." UPS spokesman Malcolm Berkley says "We believe it was intentional."
In any case, FedEx had fallen under the Railway Labor Act since 1971, and CEO Fred Smith wanted to keep it that way: he wanted the term "express companies" restored. In a House-Senate conference, Sen. Fritz Hollings (D-.S.C.) inserted the language into the 1996 Federal Aviation Administration reauthorization.
Hollings offered the amendment "at the end of a process where the bill was about to be passed," recalled Rich Michalski, an International Association of Machinists executive who at the time was the union's lobbyist. "It was offered one day, when the Senate was about to adjourn, and passed the next." Despite lobbying by the IAM and others, a filibuster against the provision led by Sen. Ted Kennedy (D., Mass.), did not gain enough support, even from Democrats.
More on FDX Dividend.com: Midday UpdateCramer: FedEx Hurts, Buy These StocksGreen Shoots May Be WeedsCramer's Take on Headline StocksDividend.com: Morning PlaybookFedEx Delivers Tepid ForecastWednesday's Headlines: FedExUPS CEO Rails Against ProtectionismTop Takes From RealMoneyFedEx Goes After UPS Market Activity United Parcel Service Incorporated Shares| UPS DOWNThe bill then required House approval, which it achieved despite the opposition of Rep. James Oberstar (D., Minn), currently chairman of the House Transportation Committee. "They limited debate on the House side," Michalski says. "You couldn't offer amendments or motions to strike." But Oberstar was not done. In 2007, he crafted language removing FedEx's Railway Labor Act classification as part of the FAA Reauthorization Bill of 2007. The bill passed the House, then died in the Senate. The current FAA bill is nearly identical to the 2007 bill, including the FedEx language: last month, it passed the House 277-136, largely along party lines.
In trading Monday, FedEx shares closed down $2.38 at $52.01, while UPS finished lower by $1.53 at $49.