UPS CFO: Obamacare Will Deter U.S. Business

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Oct. 25 (Bloomberg) –- UPS CFO Kurt Kuehn discusses the company’s Q3 earnings and how the Affordable Care Act will affect businesses in America. He speaks with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Ups is the world's largest package delivery company, considered a bellwether of u.s. economic health.

The company reported third- quarter results today with profit beating estimates.

A pleasure to have you here.

It's good to be here.

Ups delivered more than a billion packages this quarter . what has changed?

It's a different story across the world.

In the u.s., we are seeing a steady, gradual improvement in the economy.

As fast as we would like, but getting better.

The catalyst of e-commerce creating extra growth.

Exports out of asia remained fairly flat.

Perhaps the most surprising area was in europe.

We saw a 10% increase in shipments moving across borders in europe.

Is that because it was coming up with such a low base?

It is a combination of two factors.

The economy there has stabilized and will likely move into modest growth.

That is a nice turnaround.

We have been focused in the last couple of quarters on engaging in europe and taking advantage of the broad capabilities we have there.

Some of it is company specific.

Holidays are coming up.

That will mean a lot of shipping of gifts.

Retailers are pretty dependent on the holiday season.

I imagine you guys are to a certain extent as well.

What are you predicting?

We're hearing differing things.

Some of the larger retailers we have talked to are optimistic but cautious.

All of them expect to see increases in their internet commerce branches.

On top of that, this is the calendar -- the calendar for holidays is unusual this year.

It is one of the latest thanksgivings we have seen.

It will compress the holiday shopping period down by six d ays.

We will be very busy for one week less than we might have been last year.

Does that affect earnings and a number of packages being shipped?

Is there a chance there will be less because of that calendar?

In aggregate, it may be less.

We see the average daily amounts will be way up.

We expect to have nearly 32 million shipments.

That will be up 10% over last year.

Let me ask you about something in the headlines.

That would be obamacare.

Ups stopped offering insurance to the spouses of your employees you are employed elsewhere and already covered by their employers -- who are employed elsewhere and already covered by their employers.

Will the affordable care act hurt u.s. businesses?

We are adapting to it.

We made a tough decision to not offer coverage to spouses of our employees that have coverage elsewhere, the thinking being, why should ups subsidize insurance that the employee- spouse could get elsewhere?

The affordable care act is adding cost right now.

We expect next year that the affordable care act would have added over $100 million of expense to ups, with broader coverage and broader limits.

The real focus now is, there is this added expense.

The focus needs to turn to, how do we take advantage of what has been done to start driving down the cost of health care?

If we can get that going, that $100 million will be a good investment.

We are going to leave it there.

Thank you for joining us today.

"street smart" will be back in

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