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$6.7 billion threat: FedEx warns lawmakers over union legislation


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FedEx could cancel contracts for $6.7 billion in American-made planes if Congress makes it easier for unions to organize the delivery giant's workers.


In a Securities and Exchange Commission filing on Friday, the Memphis-based delivery company disclosed that future commitments to buy Boeing 777s are contingent on FedEx Express' continued coverage by the Railway Labor Act.


The disclosure serves as a warning to lawmakers seeking to put FedEx Express workers under the National Labor Relations Act, a move seen as helping the International Brotherhood of Teamsters and rival UPS.


"It's FedEx political hardball at its finest," said analyst Donald Broughton of Avondale Partners in St. Louis.


In a research note Monday, Broughton wrote: "We see FedEx's action as a deft political move that aligns the interests of Boeing and GE with FedEx, and pits the interests of the Teamsters against the interests of the machinist and several other trade unions."


Added U.S. Rep. Steve Cohen, D-Memphis, "It just shows how committed Fred Smith and FedEx are to remaining under the Railway Labor Act. That's a pretty strong shot at the Teamsters, who are a pretty strong force on the other side, as well as UPS. It's a shot across the bow."


Cohen was one of the dissenting members of the House Committee on Transportation and Infrastructure when it approved the labor provision as part of a Federal Aviation Administration reauthorization bill. Cohen said the bill hadn't been scheduled yet for action in the full House or Senate.


"We're not threatening Congress," said FedEx spokesman Maury Lane.


He added that if Congress targets FedEx Express to boost the company's chief competitor, "then we would have to take decisive action. (The change) could cause extraordinary upheaval. We will not be able to make large-scale investments like purchases of airplanes, if we can't use them."


The escape clause applies to 15 planes due for delivery between 2014 and 2019 and an additional 15 options. It doesn't apply to 15 777s due for delivery between 2010 and 2014.


Before agreeing to buy 777s from Boeing in 2006, FedEx had planned to buy French-made Airbuses as part of its push to upgrade to more fuel-efficient transoceanic cargo carriers.


A Teamsters spokesman said FedEx appeared to be broadening the conflict over the labor law change while enlisting Boeing as an ally.


"FedEx apparently is not content with cutting wages, increasing employees' medical insurance premiums and eliminating pension benefits for its employees," said Ken Hall, Teamsters International vice president and director of the package division. "Now it is threatening to leverage a contract to purchase additional aircraft from an American company to blackmail Congress. ...


"It is a slap in the face to Congress and the American people. The bill should be evaluated on its merit -- not upon the threat of FedEx to fire another torpedo through the American economy."


FedEx announced in January it had renegotiated a deal to buy 777 Freighters from Boeing over the next decade. The escape clause wasn't mentioned at the time. At the time, the company increased its order from 15 planes to 30 and agreed on an option for another 15 planes.


Broughton calculated the purchase price at about $225 million per plane.


"This plan will create thousands of jobs for Boeing workers, GE workers (who make the jet engines) and workers at hundreds of subcontractors," Broughton wrote. "We find it more than a bit intriguing that now congressmen will have to vote against Boeing, GE and the creation of thousands of unionized jobs for machinists (and several other trade unions) in order to change the labor law status of FedEx in an attempt to possibly help the Teamsters union."


FedEx's SEC filing on third-quarter earnings discussed the Boeing agreement, stating: "Our obligation to purchase these additional aircraft is conditioned upon there being no event that causes FedEx or its employees not to be covered by the Railway Labor Act."


Under that act, a union such as the Teamsters would have to organize FedEx Express employees nationally, rather than in local bargaining units. Drivers for UPS, FedEx's chief domestic competitor, are largely represented by the Teamsters, but FedEx has fended off organizing attempts for years.


The provision in the FAA bill is unrelated to the Employee Free Choice Act, another pro-organized-labor measure making its way through Congress.


-- Wayne Risher: 529-2874



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