Why UPS Is Going Green

On May 13^th UPS issued a press release to announce their purchase of 200 hybrid electric vehicles [HEVs] to compliment their already existing order for 300 compressed natural gas [CNG] vehicles for their US fleet.

While this purchase has been spun as a positive marketing tool for UPS to improve the perception among consumers and their clients of the environmental initiatives they undertake, the true motives of these purchases still revolves around profitability for the company and a focus on decreasing costs.

In the fiscal year 2007, UPS spent a total of $2.97B in fuel costs for its entire global operations; a 12% increase vs. 2006. The savings stated alone in their press release (176,000gal/yr @ $3.20/gal) will amount to around $560,000. That might seem like pennies in comparison to their total fuel expenses (less than 2% decrease), but it demonstrates that UPS is focused on targeting cost savings in an environment of increased costs and negative sentiment towards fuel surcharges by their customers.

The trend of moving towards more cost-effective (green) vehicles makes sense for a shareholder who is concerned with future revenue and profit growth of a company. Alternative-fuel vehicles only represent 2.4% of their entire delivery fleet at this time, but demonstrate a strong commitment by the company to begin looking towards putting cost controls in place to contribute to future profitability.

As an investor I focus on corporations who have the initiative to reduce expenses in order to continue improving profitability and creating long-term value for shareholders. This falls within my 5% Rule and UPS is one of the best I’ve found at concentrating on what they can tangibly change in reference to future cost-cutting while maintaining a positive image of change in marketing activities to heighten the awareness within the environmental movement. Conservation is key

Disclosure: I hold a long position in UPS.

Comments

[nakedjaybird:]

I have tried to convince Wal-mart (and Pickens); so let's try UPS.

Sep 18 11:41 AM

Hogwash, hogwash.

Tax gasoline and diesel at $5/gal right up front, permanenly!! (It is amazing what even $2 tax would do - but let's provide the real emphasis, as if it were an embargo only the fuel is still available).

Tax diminishes as consumption declines.

Tax gets applied to:

1) ELECTRIFYING the existing RAILROADS (eliminate the diesel in diesel-electric; and no, don't convert ANY engines to NG) and,

2) building ELECTRIED inter/intrastate FERRIES in/alongside/above the existing right-of-ways, which is also where the BEEFED-UP ELECTRICAL GRID also belongs, and which will be close enough to connect nearby solar and wind farm power and take the power from the countryside to every major city, DUH!!!!!!!!!!!!!!!.

Now that's good policy AND PLAN. Report abuse
nakedjaybird
Sep 18 12:00 PMAnd 3), so that you don't forget the best HYBRID - push the home-grown biofuel injected burner (with no moving parts) encapsulated with solid-state direct conversion to electric waste heat devices (which capture 80-90% of the energy) powering the 20-40 hp ChorusMotor with the only onboard storage device being the 5 GALLON GRASS TANK which we fill at 1/3 of the existing fueling stations because we get 3-4x the current fuel economy (while we subsidize the homegrown biofuel industry by using the existing $billions of subsidies given to farmers to do NOTHING with their land in CRP programs).

Now, there's win-win-win: energy independence by taking 21 mbd crude to ___ (doesn't matter, because as soon as our consuption drops more than 1 mbd the world will be awash in crude. Flooded, all the way to ZERO BURNING of hydrocarbons, for the right reason, not the liberal greenie reason.

2008 Sep 18 12:08 PM

[notsosmart:]

LOL.nothing sane is going to happen. profit & greed rule the day.

2008 Sep 18 12:57 PM

[nomorestress7:]

FedEx has been doing this for many years... well before it was popular to be green.

2008 Sep 22 12:25 PM