United Parcel Service (UPS.N) on Wednesday said it would return to the bargaining table with a better offer for roughly 340,000 Teamsters-represented U.S. workers, in a bid to avert a potentially economically damaging strike on Aug. 1.
"We are prepared to increase our industry-leading pay and benefits, but need to work quickly to finalize a fair deal that provides certainty for our customers, our employees, and businesses across the country," UPS said in a statement.
The union said the world's largest delivery company contacted it on Wednesday with an offer to resume talks next week, the International Brotherhood of Teamsters said in a statement on Twitter.
Talks broke down on July 5, with each side blaming the other.
A key sticking point in the talks is pay increases for experienced part-time workers who are making roughly the same or even less than new hires because starting wages jumped due to the labor shortage in the last few years.
Any disruption to the business of UPS would be broadly felt because the company handles about 20 million packages a day - about a quarter of the parcel shipments in the United States. Those include deliveries for online retailers like Amazon.com (AMZN.O), high-value prescription drugs for doctors and hospitals, and inventory for millions of other large and small businesses.
A strike could be one of the costliest in at least a century, with the impact of a 10-day strike topping $7 billion, according to one think tank.
UPS pilots, who belong to a different union, would also stop flying in solidarity with the striking workers.
The Teamsters have been holding "practice pickets" in major cities around the country to keep pressure on UPS.
Despite all of the noise and hand-wringing, many transportation executives and analysts believe the two sides will reach a deal before the deadline.
That's because each side depends on the other.
UPS called its skilled and loyal Teamster employees a competitive advantage early in the pandemic when orders of everything from home workstations and exercise stations to sofas and large TVs overwhelmed delivery companies.
On the other hand, UPS is the largest employer of Teamsters at a time when unions are fighting to grow.
Meanwhile, Teamsters leader Sean O'Brien told Reuters last week he has asked President Joe Biden not to intervene in the talks, even as retail groups and other interested parties push for the administration to weigh in.
"We believe an August 1 strike at UPS remains possible but not yet probable," Susquehanna analyst Bascome Majors said in a client note. "Official news that Teamsters-UPS negotiations restart next week after a 2.5-week break clears a path to 'get to yes' before the deadline."
An IRS plan to test drive a new electronic free-file tax return system next year has got supporters and critics of the idea mobilizing to sway the public and Congress over whether the government should set up a permanent program to help people file their taxes without needing to pay somebody else to figure out what they owe.
On one side, civil society groups this week launched a coalition to promote the move toward a government-run free-file program. On the other, tax preparation firms like Intuit — the parent company of TurboTax — and H&R Block have been pouring millions into trying to stop the idea cold.
The advocacy groups are exponentially out-monied.
An April AP analysis found that overall, Intuit, H&R Block, and other private companies and advocacy groups for large tax preparation businesses, as well as proponents in favor of electronic free files, have reported spending $39.3 million since 2006 to lobby on “free-file” and other matters. Federal law doesn’t require domestic lobbyists to itemize expenses by specific issue, so the sums are not limited to free-file.
Intuit spent at least $25.6 million since 2006 on lobbying, H&R Block about $9.6 million, and the conservative Americans for Tax Reform roughly $3 million.
In contrast, the NAACP has spent $140,000 lobbying on “free file” since 2006 and Public Citizen has spent $110,000 in the same time frame.
“What we have on our side is public opinion,” said Igor Volsky, executive director of the liberal Groundwork Action advocacy group.
Volsky’s organization and leaders from Public Citizen, the Center for the Study of Social Policy, Code for America, the Economic Security Project, and others launched the “Coalition for Free and Fair Filing” on Wednesday. The group’s mission is to “ensure all U.S. taxpayers can easily file tax returns and get the tax credits they deserve by safeguarding and expanding” the new IRS program.
“The overwhelming majority of people demand a free-file option,” Volsky said. “Now the question for us is how do you channel that into effective political pressure.”
The IRS in May released a report that said most taxpayers are interested in filing their taxes directly to the IRS for free, and concurrently announced plans to launch the pilot program for the 2024 filing season. The goal is to test a direct file system that will help the IRS decide whether to move forward with a more permanent program.
That idea has faced the immediate threat of budget cuts from congressional Republicans.
Republicans on the House Appropriations Committee in June proposed a budget rider that would prohibit funds to be used for the IRS to create a government-run tax preparation software, unless approved by a group of House and Senate committees.
The move “safeguards the IRS from an obvious conflict of interest where the tax collector becomes the tax preparer,” the bill’s summary states.
A Government Accountability Report in April 2022 found that 70% of taxpayers were eligible to use an existing free-file program but just 3% actually used the service. That program consists of a public-private partnership of tax software companies that offers free services to certain taxpayers outside of the IRS website.
Additionally, anyone can prepare and mail in their taxes for free, but the tax code is so complex that almost 50% of Americans use a tax prep company. IRS officials have estimated individual taxpayers pay an average of $140 preparing their tax returns each year.
Derrick Plummer, a spokesman for Intuit, stressed the free options that already were available.
“An IRS direct-to-e-file system is redundant and will not be free – not free to build, not free to operate, and not free for taxpayers,” Plummer said, adding that it “will unnecessarily cost taxpayers billions of dollars.”
H&R Block said in a statement the direct e-file pilot “continues to be a solution in search of a problem.”
Citing the free-filing options for Americans under a certain income threshold through the existing Free File Alliance, H&R Block said, “This pilot is unnecessary and faces significant barriers to providing comprehensive tax preparation services.”
H&R Block came under fire after congressional Democrats last week released a report stating that it was one of three large tax preparation firms that sent “extraordinarily sensitive” information on tens of millions of taxpayers to Facebook parent company Meta and Google over the course of at least two years.
Susan Harley, Congress Watch managing director at Public Citizen, said “We’re outgunned as far as money being spent, but we have the moral higher ground” in supporting the free-file program over third-party tax preparers.
Nations like Germany, Japan, the U.K., and other Organization for Economic Cooperation and Development countries already offer their taxpayers some form of pre-populated tax document.
Some countries also use “tax agency reconciliation,” where taxpayers who opt to participate provide the government with basic employment status information and the tax administrator sends them a return with their calculated tax liability.
Research conducted last year by a group of Treasury, Federal Reserve, and other academics shows that the IRS could pre-populate 42 to 48% of all tax returns.
The IRS has already seen cuts to its funding since the passage of the Inflation Reduction Act that President Joe Biden signed last August gave the agency $80 billion to modernize and hire more workers and move toward the free-file program.
House Republicans built a $1.4 billion reduction to the IRS into the debt ceiling and budget cuts package passed by Congress this summer. The White House said the debt deal also has a separate agreement to take $20 billion from the IRS over the next two years and divert that money to other non-defense programs.
Elon Musk’s big bet that Tesla price cuts could boost sales and profits amid increasing competition and poor economic sentiment appears to be yielding mixed results. Sales jumped and the company beat analyst expectations for net income in the April-June quarter, although the company’s profit margins declined. Tesla shares followed suit in after-hours trading.
The Austin, Texas, maker of electric vehicles, solar panels, and batteries reported net income of $2.7 billion in the quarter, a 20% increase from a year ago. Earnings per share also rose 20% to 78 cents when measured via generally accepted accounting principles. Total revenue rose 47% to $24.93 billion.
Analysts, however, tend to focus on Tesla’s own measurement of profit, which excludes stock-based compensation expense. By that measure, Tesla’s net income zoomed to $3.15 billion, or 91 cents a share, sharply exceeding average analyst estimates of 80 cents per share according to FactSet. Some analysts had expected profits to fall because of the price cuts.
Tesla shares, however, initially stayed flat at roughly $292 in after-hours trading immediately following the earnings report, up a smidgeon from their close at $291.26. As Tesla executives spoke to analysts in a conference call, shares slipped more than 4%.
Tesla reported strong vehicle delivery numbers on July 2, saying they rose 83% compared to the year-earlier quarter after the company cut prices several times on its four electric vehicle models. Tesla sold a record 466,140 vehicles worldwide from April through June, nearly double the 254,695 it sold during the same period a year earlier.
The vast majority of those sales involved Tesla’s popular Model 3 sedans and Model Y crossover SUVs.
But the earnings report provided mixed messages on one of the larger questions facing Tesla: whether the automaker’s discounting strategy can boost sales while preserving its profit margins. Tesla’s operating margin, which represents how efficiently sales are turned into pretax profits, fell to 9.6% in the April-June quarter, down significantly from 14.6% a year earlier. The measure had also declined sharply in the January-March quarter.
While pressures on profitability and pricing continue to weigh on Tesla, Jeff Windau, an analyst with Edward Jones, said he took heart from some management comments about cost control and said the company’s overall trajectory remains sound.
“The long-term drivers for growth remain in place and there are just going to be some near-term headwinds in the current environment we’re in,” he said.
In the company’s conference call with analysts, Musk praised the company’s performance despite high-interest rates and what he called significant economic uncertainty, then quickly changed the subject to Tesla’s advanced projects such as its so-called “full self-driving” software.
Despite the name, Tesla cars with the software enabled cannot drive themselves, and the company warns drivers that they have to be ready to intervene at all times. Musk extolled Tesla’s work on a new machine-learning system it calls Dojo that the company plans to use for improving its self-driving software.
Musk also said that Tesla should deliver its long-promised Cybertruck — an unusual-looking pickup with an angular design that might not look out of place in a “Mad Max” movie — by the end of the year. Tesla announced Saturday that the first Cybertruck had rolled off the assembly line.
But analysts aren’t convinced that the vehicle will be widely available any time soon, not least because other automakers have already unveiled more conventional-looking electric pickups such as the Ford F-150 Lightning.
“I don’t think we’ll see any meaningful volumes, certainly not this year,” said Seth Goldstein, an analyst with Morningstar Research. “Not even next year. Maybe we’re looking more into 2025, 26, 27 until we see them.”
Netflix enjoyed its biggest springtime spurt in subscribers since the early days of the pandemic three years ago, providing the latest sign that a recent crackdown on password sharing and the rollout of a cheaper subscription option are paying off.
The video streaming service added 5.9 million subscribers during the April-June period, according to numbers released Wednesday along with its latest quarterly financial results. The gains easily surpassed the roughly 2.2 million additional subscribers that analysts surveyed by FactSet Research had anticipated. Netflix ended June with 238.4 million worldwide subscribers.
Investors seemed unsatisfied, perhaps rattled by management commentary in a shareholder letter warning that “quite a competitive battle” continues to unfold against the backdrop of ongoing strikes by both the writers and actors union in the U.S. that threaten to clog the pipelines feeding entertainment to streaming services. Netflix’s stock price fell 8% in Wednesday’s extended trading. The drop could also reflect some investors locking in profits that have accrued while the shares have climbed by more than 50% so far this year.
Money manager Louis Navellier said Netflix now appears “locked and loaded” again after going through a turbulent stretch that included losing 1.2 million subscribers during the first half of last year. Even though Netflix has bounced back this year, Investing.com analyst Jesse Cohen believes another slowdown may be coming. “It will be a challenge for Netflix to sustain this pace of subscriber growth in the future,” Cohen said.
Netflix predicted its subscriber growth during the July-September period will be similar to the numbers posted from April through June.
The second-quarter performance marked Netflix’s biggest spring —- traditionally the company’s slowest stretch of growth — since gaining 10 million subscribers during the same period in 2020 under dramatically different market conditions.
In 2020, people were still largely stuck at home and looking for ways to keep themselves entertained while governments around the world struggled to find a way to contain the spread of the pandemic. Now, Netflix finds itself trying to bounce back from a growth slowdown amid stiff video streaming competition and inflationary pressures that have caused many households to clamp down on spending, especially on discretionary items such as entertainment.
As an antidote, Netflix last year introduced a low-priced option that includes commercials and then began to block the rampant sharing of passwords that has enabled an estimated 100 million people worldwide to watch its TV series and films for free. Freeloading viewers are now being required to open their own accounts unless a subscriber with a standard or premium plan agrees to pay an $8 monthly surcharge to allow more people living in different households to watch.
In its shareholder letter, management said the crackdown on password sharing is resulting in a “healthy conversion of borrower households into full paying Netflix memberships.”
And Netflix still isn’t done tinkering. As part of Wednesday’s earnings release, Netflix also revealed it’s phasing out its cheapest ad-free plan – a service that costs $10 in the U.S. Existing subscribers already paying for this basic plan will be allowed to keep it. The shift appears designed to get more people to switch to the $7 monthly plan that includes commercials in hopes of boosting ad revenue or signing up for its $15.50 monthly standard plan or $20 monthly premium plan.
“There is just tons of work ahead of us, tons of opportunity,” Netflix Co-CEO Greg Peters said during a Wednesday conference call.
The pricing changes that have already been made helped Netflix boost its second-quarter revenue by 3% from the same time last year to $8.2 billon, falling below analyst forecasts. Netflix earned $1.49 billion during the period, compared with $1.44 billion last year. But earnings per share came in at $3.29 per share, eclipsing the average analyst estimate of $2.85 per share, according to FactSet.
Netflix didn’t delve into the potential fallout from the current walkout in the U.S. by writers and actors. The dispute revolves largely around the payment system used in video streaming and the rise of artificial intelligence technology threatening to exploit the work of humans and eventually replace them.
Unlike traditional movie and TV studios in the U.S., Netflix has been able to keep feeding its entertainment pipeline with shows that it has been able to use to keep luring in and retaining subscribers.
Netflix co-CEO Ted Sarandos deflected a question about how long Netflix could keep releasing new series and films if the strike drags on past Labor Day. “It’s beside the point,” Sarandos said during the conference call. “The real point is we need to get this strike to a conclusion so we can continue to move forward.”