United Parcel Service (UPS) has announced plans to cut 12,000 jobs in an effort to save more than $1 billion (£790 million) following a significant drop in delivery demand since the peak of the Covid-19 pandemic.
UPS fell short of Wall Street’s expected revenue target of $95.5bn (£74bn). The company reported a decrease in shipping volume, both internationally and domestically, in its fourth-quarter 2023 earnings report.
Consolidated revenues were $24.9bn (£19.5bn), marking a 7.8% decrease from the fourth quarter of 2022, according to the earnings report. Consolidated operating profit was $2.5bn (£2bn), down 22.5% compared to the fourth quarter of 2022 and down 27.1% on an adjusted basis.
Reports indicate that UPS shares also plummeted nearly 9% amid the economic slowdown.
UPS’ current workforce allegedly decreased by about 45,000 employees from 2021, and rival FedEx has also been reducing its workforce. President and CEO of FedEx, Raj Subramaniam, during an earnings call in June stated FedEx’s US headcount declined by about 29,000 in the fiscal year of 2023.
UPS executives stated that most of the job cuts would come from the ranks of its 85,000-management staff, as well as some contractors. These positions will not be reinstated even as the business recovers, the executives emphasised.
The announcement of the mass layoff by UPS comes only months after the delivery company averted a strike that threatened to disrupt package deliveries for millions of businesses and households nationwide by agreeing to a new five-year labour contract. The International Brotherhood of Teamsters reported that an overwhelming 86% of voting members approved the contract.
UPS has also called staff back to the office five days a week.
“It’s a change in the way we work,” said Brian Newman, UPS’ EVP, and chief financial officer. “So as volume returns to the system, we don’t expect these jobs to come back. It’s changing the effective way that we operate.”
The company is also considering a potential sale of Coyote, a truckload brokerage business it acquired in 2015, which Carol Tomé, CEO of UPS, referred to as a “highly cyclical” business with “considerable earnings volatility.”
Tomé remarked: “2023 was a unique and difficult year, and through it all, we remained focused on controlling what we could control, stayed on strategy, and strengthened our foundation for future growth.”
She added: “We experienced declines in volume, revenue, and operating profits across all three of our business segments.”
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