UPS sells trucking unit
themiddlemarket.com
themiddlemarket.com
This wouldn't necessarily indicate anything about UPS's parcel business.
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.
B2C freight is a bit of a shit show.
Quite an interesting business, somewhere between standard parcel and LTL.
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.
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.
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.
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.
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...
800mm for that kind of business seems like a very very good deal for UPS then!
As is often the case with internal business units operating as cost centers and not forced to be externally competitive, they attrition over time and become less attractive vs external alternatives which competed and improved over the same time.
I suspect this is the case here and after 15 years they calculated it would be more efficient to have it run externally. UPS already uses TFI for a lot of these needs and the deal sees them continue to do so for the next 5 years.
It's not uncommon for businesses who own their building to sell the building to a real estate company and lease it from them when they can better allocate that capital for growth.
Selling is different from shuttering.
Consider a semi truck as a server. Belonging to UPS it's a dedicated server - when UPS doesn't need it, it's idling for the most part. When it belongs to TFI it's offered as a VPS. If it's sitting in a parking lot because UPS doesn't have a need for it and can't rent it to someone else, it's a quarter million dollar lawn ornament.
If TFI can instead, through increased client demand and smarter routing/logistics management ensure that the fleet is moving and making money 85% of the time vs UPSs 60%, that 40% improvement is mostly margin. Throw in economy of scale for things like fleet maintenance, financing, fuel and workforce/driver management and you drive operating costs down on the same fleet doing the same work.
Add that up and of TFI can service UPSs demand for less + add their own on top as extra margin, they just created value.
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.
https://www.bloomberg.com/news/articles/2021-01-25/ups-to-se...
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...
Edit: Actually, let's use the one that seems to have the least paywallness (https://news.ycombinator.com/item?id=25916965).
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.
https://us-west.meest.com/services/service/international-par...
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.
Selling an LTL business doesn't change anything...