BF: How do you view the current economic conditions in the U.S. and globally? What changes do you see?
Kuehn: Clearly we're in a period of substantial volatility, with conditions changing day to day and week to week. So it does create a challenge for all business people to stay up to speed on what's going on and try to steer the boat in light of which way the winds are heading.

At a broad level, we see that the U.S. has been in the slowdown the longest, and clearly we see no light at the end of the tunnel yet for the U.S. economy -- although perhaps things are starting to at least find the bottom. I guess that's still a question.

Globally, we're seeing some dramatic changes in trade flows. Just in the last 3 to 4 months, trade flows between the major economies have shifted quite a bit as businesses have pulled in their horns.

BF: What is your take on the recovery to date? Are there missing pieces here, or elements that are missing?
Kuehn: I don't have any real advice as far as what the government should or shouldn't be doing goes. There is a lot of economic stimulus that's being thrown in, and at some point in time that will have impact.

Probably the consumer is the wild card in most of this -- they've clearly become much more conservative and seem to have closed up their pocketbooks in the last few months. So they're a wild card. Presuming that the financial markets continue to relax a little, then it will just be up to the consumers to determine when they start having enough confidence to jump back into the game.

BF: How does a company of UPS's size plan in a climate like this one?
Kuehn: We actually have put less focus on perfect forecasting. Normally, we spend a lot of time trying to really refine one good forecast, develop a business plan, and hold our people to it. We realize that in today's environment any forecast you make is going to be wrong by the time you make stride.

The goal that we have is not so much to try to forecast exactly what's going to happen, but to do two things: Number one, think more about a range of possibilities. So what do you do if it comes out lower than you think or higher? So create some anticipated range right off the bat and develop realistic scenarios and plans to operate in those different environments.

The other thing that we've done, and this gets into performance measurement and accountability rather than in trying to lock in a specific plan, is that we've created a number of flexible measures -- the real message being, that our people in the field need to make sure that they adapt, and if revenue comes in below plan, they adapt their cost to match it. So we've gone to a series of unit measures, unit cost. We've looked at operating leverage. We look at what's the ratio of the change in revenue to cost, rather than a fixed goal.

BF: Can you tell us how your focus on risk management has been evolving? Has it changed over recent months, or has the approach changed?
Kuehn: Certainly we've had more focus on the geographical components of it. Different economies in different states of maturity have different vulnerabilities. So we are staying highly attuned to the economic conditions in some of the areas around the world. Clearly, in those economies we think are most at risk we will tend to be more asset-light than those economies that are more stable.

The other area, though, of risk to us is the risk of our customers, and trying to make sure that from a finance perspective we are on high alert for guarding against our days sales outstanding getting too long, and the ultimate risk of bad debt. From a functional perspective that's a high priority now, because clearly all of our customers are facing headwinds and some of them may not make it. Being more sensitive to that than normal would be important.

BF: When you look at the skills and the talent that you have in the finance department, are you dedicating different people to help better monitor counterparty risk than you were maybe 12 months ago?
Kuehn: I'm not sure we've really changed the people doing that work; what we have done is that we've communicated it more broadly. Normally, our accounts receivable and collections people kind of do their stuff, and it's not a companywide awareness. But clearly with the increased exposure, I have personally talked about it with senior management and we've communicated more broadly that our managers in the field need to stay in touch with their customers, watch for unusual occurrences or trends, and just collaborate.

At the same time, there are a number of great companies that we serve that are having some challenges but are going to be around for many years, and we don't want to overswing. So it's a delicate balance. The bankruptcy risk is probably the area that can be more challenging -- just the typical accounts receivable; as long as we stay in touch with our customers, we usually are able to maintain pretty good controls. But sometimes companies go bankrupt overnight, surprising everybody, and that's an area of challenge.

One thing that UPS does do, and we're pretty good at, is that when companies go into Chapter 11 and reorganization, we work very hard to help the company work through that and actually frequently get a preferred vendor status because typically UPS is one way that companies generate revenue. We stand real close to revenue with the delivery of the finished goods. So in many cases we're able to work productively and actually do two things: one, help the company come out of Chapter 11, and two, be able to recover most if not all of our exposure.

BF: What can you tell us about your banking relationships? Has there been a flight to quality that we frequently hear about?
Kuehn: UPS tended to focus most of its business in the larger organizations, just given the scope of our financial both assets and needs. We had a large group of preferred banks and that shifted a little bit, but not dramatically. I mean, as companies merge together, we redevelop relationships with the merged entities.

BF: As a provider of the logistic services, you would imagine that companies across the board are cutting back on premium services for shipping goods and going with standard fees and services. Is this really the challenge facing UPS's business, or would you characterize it differently?
Kuehn: That it is a significant factor when times get tight. We've seen this numerous times as we've survived through 20 recessions, that customers trade down, defer, send things deferred versus express. We did see that get amplified last year with the spike in fuel prices. We've seen many cycles, and we know that typically there's some trade-down. Frankly, we've never seen cycles in the past where there was a 20 or 30 percent price increase at the same time that you're in the middle of a recession. That, in effect, was what happened with the fuel surcharge.

It's both bad news and good news for UPS. The bad news is that it does create some revenue headwinds, and we have to struggle to adapt. The good news is, though, that UPS is pretty well qualified, given our broad portfolio, to help companies reduce their spend. So we actually have a saying in the sales force, and that is, "We're here to help customers trade down, not out." So we can actually help customers take a look at their supply chain and figure out how can they realign it so that it does drive less expense. Ultimately, when we work aggressively to help customers, we're able to keep the majority of our business, perhaps even gain during this year, even though we may be sacrificing some of the high-end revenues in the short term.

BF: During times like these, how do you rally the team? How do you counter the anxiety being fueled as we keep talking or reading about troubling economic developments?
Kuehn: A couple of things. Number one is that UPS is a great company that as I said has operated through 20 recessions. We've gone through this before, we're going to come through it. And so this is the time when employees really realize what a great thing it is to work for a company with such history and financial strength.

The other thing is that for us it's kind of -- to paraphrase Charles Dickens, "It's the best of times and the worst of times." It's the worst of times because of the incredible headwinds and challenges, and we're all working harder than ever both to help our customers and to sustain our financial strength. But it's the best of times because UPS is able to shine in times like this. But we are by far the strongest player financially, and we really can go to the market and help companies to work through this. Actually, during tough times we find that our customers are looking for vendors that they know are going to be around.

For our people, this is actually a great time because UPS has a great reputation and a tremendous financial capacity. And we think that if anything we'll come out of this stronger than ever. Because the challenges many companies are facing are weakening some of our competitors, we'll come out of this in an even better relative position than we were when we went in.

BF: We're aware that your path to the CFO office was really not the traditional path most CFOs take. And just to illustrate this point once more, could you recount some of the career milestones that brought you to the CFO office?
Kuehn: I actually started as a package car driver. I was out of college and wasn't quite sure what I wanted to do for a career. I drove for about a year, loved the work, but never considered a career with UPS. I was asked to come into management and went into the Industrial Engineering Group, which is all about efficiencies and operating networks and plans. While I was doing that work, UPS sponsored me to go back and get an MBA, and that kind of helped me understand the strengths of UPS as I studied business.

I spent about 12 years, I guess, in the Industrial Engineering Group, and eventually came into Corporate in charge of Facilities Planning and Optimization, which got me working much more with the finance group -- and also with the marketing group, because clearly market demand drives where we need to go with assets.

I migrated then into a number of large-market strategy projects, as kind of the engineering representative, and then, eventually, because I'd worked so much with the Finance Group on projects and assessments, I came over in to the Finance Group and worked in Financial Planning. I migrated over into merging engineering information and financial analysis to create our activity-based costing activities, which helped us to price and to understand profits.

Over time, I've become kind of a jack-of-all-trades. I eventually took over a group called Business Information Analysis, and then in 1999, when we announced we were going to public, they asked me if I wanted to take over the investor relations job, which was an incredible experience. And then I did that for 4 years, helping to bring this great private company into the public limelight.

And then 5 years ago was asked if I wanted to come in and head up sales and marketing, so that was quite a career shift and a learning experience. And then after 4 years in that job, I guess they figured I needed to do something else, and they asked me to come into the CFO position. So it's been a circuitous route.

BF: Your career spans 20 years inside a private company and 10 years inside a public company Is there any time when you look back and say, "I wish we were private" or "Oh, to be private now!"
Kuehn: No, it was a huge cultural change for UPS to go from being a private company for over 90 years, with the stock ownership spread broadly but really restricted to UPS employees, retirees, and some of their families. The great thing about being private was that we could stay focused on the long term and make the best economic decisions without worrying about Wall Street.

But going public has also been a tremendous benefit for UPS, and what going public has done is that it has really created more of a connectivity with the business world in general. It makes sure that UPS stays on its toes, frankly, and that we are responsive to changes. So it has really brought another seat at the table that helps us to make better decisions.

There are days when the sell side seems to not get it, or the market's having a bad day and UPS, we think, is doing fine. But the benefit of having many intelligent people looking at what we're doing and frankly criticizing our strategies is good, because sometimes inside a company it's hard to have anybody say when the emperor's got no clothes. The financial analysts on Wall Street are all too happy to play that role.