UPS sells trucking unit

https://www.themiddlemarket.com/news-analysis/ups-sells-trucking-unit-for-800m

by cwwc • 5 years ago

151 66 5 years ago

MHordecki• 5 years ago

(...) separate from the package deliveries for which UPS is known, is primarily a business-to-business enterprise hauling large industrial cargo in big trucks.

mtmail2• 5 years ago

Same article on bloomberg.com which doesn't require to login

https://www.bloomberg.com/news/articles/2021-01-25/ups-to-se...

ardy42• 5 years ago

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...

duxup7• 5 years ago

https://outline.com/MbSU85

mtmail2• 5 years ago

That outline was only the two paragraphs, this outline is the full article: https://outline.com/bdAVGF

cwwc• 5 years ago

here too: https://www.themiddlemarket.com/news-analysis/ups-sells-truc...

dang2• 5 years ago

We'll use that instead. Thanks!

dang2• 5 years ago

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).

rvba• 5 years ago

Is this the "MBA school of divesting so they can become a service company that sell brand and outsources everything"?

tgtweak3• 5 years ago

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...

ornornor• 5 years ago

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!

gowld• 5 years ago

If it's dead weight, why is someone buying it?

Selling is different from shuttering.

Ericson2314• 5 years ago

That depends on whether LTL crates/pallets and parcels were ever on the same trucks at the same time.

hedora• 5 years ago

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.

duxup7• 5 years ago

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• 5 years ago

So this is material on pallets, but not including household-type moving nor material needing specialized trailers?

darksaints2• 5 years ago

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.

tyingq4• 5 years ago

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.

duxup7• 5 years ago

Generally pallets are most common, but it can vary.

S_A_P• 5 years ago

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.

hef198983• 5 years ago

Yeah, pretty much so. LTL is usually B2B, either for smaller shipments. Hence, less than a full truck volume vise. And it is a royal pain, also for businesses. You are mixing cargo with other clients, you are depending on a third party schedule and routing. There are multiple touch points increasing the risk of damage. Usually, there are multiple carriers involved.

And funny enough, there is close to zero synergy with an existing parcel network or an existing full truck load business. Besides being able to use the same trucks. And since most trucks are owned by third parties anyway, well even those synergies are small.

That being said, the LTL business is huge. It just seems that UPS is streamlining its own operation.

ryanmarsh3• 5 years ago

I always thought LTL meant “load-transfer-load”. Like what they do at LTL warehouses.

darksaints2• 5 years ago

That operation is referred to as crossdocking in the industry. Pretty silly that people would downvote you for that though.

bdcravens• 5 years ago

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)

mistrial9• 5 years ago

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

figital• 5 years ago

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• 5 years ago

UPS Freight was an acquisition of Overnite Transportation several years ago. Not sure how much real integration between the companies ever happened beyond branding.

bombcar• 5 years ago

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.

ROFISH• 5 years ago

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.

Aloha• 5 years ago

This is the former Overnite transportation business that UPS purchased.

https://en.wikipedia.org/wiki/UPS_Freight

bserge• 5 years ago

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• 5 years ago

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.

us0r• 5 years ago

These guys are absolutely amazing:

https://us-west.meest.com/services/service/international-par...

jmclnx• 5 years ago

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.

_2d30• 5 years ago

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/

mchusma• 5 years ago

Have friends at UPS, can confirm it's all union, and it's really baked into their culture.

athriren• 5 years ago

the drivers on the brown delivery vans are unionized too, as opposed to FedEx, which uses all contractors.

hef198983• 5 years ago

As does Amazon. You can tell by the driver's yellow badges. Not that Amazon is trying to hide that, so.

duxup7• 5 years ago

UPS already is a union shop.

Selling an LTL business doesn't change anything...

AnimalMuppet2• 5 years ago

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• 5 years ago

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.

jessaustin3• 5 years ago

Yeah the theory is that the price of a business reflects its future income.

pasttense01• 5 years ago

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.

neonate• 5 years ago

https://archive.is/2BqHT

saltyshake• 5 years ago

They once overnighted Tom Cruise' car https://youtu.be/Ok2NWF53bUY

UPS sells trucking unit

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