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UPS announced it would cut 12,000 jobs in an effort to save $1bn just months after agreeing a costly pay deal with its Teamsters union and as weak demand for its delivery services underpinned a soft annual revenue outlook.
The delivery company said on Tuesday that the headcount reductions would be focused on its 85,000 workers in management, with three-quarters of the lay-offs expected to occur in the first half of the year. UPS, which employs 495,000 workers worldwide, does not expect these jobs to come back.
UPS in July reached a pay deal with the Teamsters, which represents 340,000 of its 500,000 employees, that resulted in a 12.1 per cent increase in union wage rates. The agreement helped avert a potential strike, which had threatened to cause economic chaos by stranding more than a quarter of all parcels in the US, but the company months later trimmed its 2023 financial guidance and said the deal would weigh on revenue and margins.
UPS on Tuesday said it now expected revenues in a range between $92bn and $94.5bn in 2024, below Wall Street forecasts for $95.6bn. Its revenue in 2023 was $91bn, a 9.3 per cent drop from 2022.
UPS, often regarded as a bellwether for the global economy due to the breadth of packages and documents it ships, reported fourth-quarter revenue of $24.9bn that was down 8 per cent year on year and missed Wall Street forecasts due to a decrease in average daily parcel volumes.
The company also announced it would explore “strategic alternatives” for its acquisition of Coyote, a truckload brokerage business, which made up 38 per cent of the revenue decline in the company’s supply chain solutions business during 2023.
“2023 was a unique and, quite candidly, a difficult and disappointing year,” chief executive Carol Tomé said on Tuesday.
In addition to the workforce reductions, Tomé confirmed that workers were now expected to come to the office five days a week.
UPS shares were down about 7.5 per cent in morning trading in New York on Tuesday.
