Parcel delivery giant UPS has announced plans to cut 12,000 jobs following a ‘difficult and disappointing’ year in 2023. The company cited a softer economy and labor disputes as contributing factors to the decision.
UPS Chief Executive Carol Tomé revealed that the job cuts are expected to result in cost reductions of $1 billion for the company. The move comes as UPS grappled with a decline in sales and profits, partly attributed to economic weakness in Europe and parts of Asia, as well as disruption in the US due to a labor strike.
The company disclosed that it has managed to win back approximately 60% of the business lost during the labor dispute and anticipates a modest growth rebound this year. However, the company’s forecast fell short of analysts’ expectations, causing its shares to plummet by over 7%.
UPS also highlighted ongoing costs associated with its new contract with the Teamsters union, which are projected to continue weighing on the company in the next six months. As part of the deal, full-time drivers secured a pay and benefits package averaging about $170,000 annually.
The planned job cuts, amounting to approximately 2.5% of UPS’s global workforce, will primarily impact the company’s management staff of 85,000 and some contractors. Notably, these positions will not be reinstated, even as the business gradually recovers.
UPS Chief Financial Officer Brian Newman emphasized that the job cuts signify a fundamental shift in the company’s operations. Additionally, UPS is exploring the potential sale of Coyote, a truck load brokerage business it acquired in 2015.
Despite the challenges, Tomé expressed optimism about leveraging technology, particularly artificial intelligence, to enhance productivity. She underscored the significant advancements in technology within the past year, particularly the emergence of generative AI and its applications within the company.
Looking ahead, UPS remains focused on capitalizing on opportunities to boost productivity, with Tomé highlighting the company’s concerns about potential shipping disruptions arising from conflicts in the Red Sea and drought in the Panama Canal.
The announcement of the job cuts comes as UPS grapples with the evolving landscape of global shipping and strives to navigate through economic challenges and labor-related issues.
