UPS has unveiled plans to trim its workforce, waving goodbye to 12,000 jobs, to realize substantial cost savings of $1 billion.
The decision follows a recent costly settlement with the Teamsters union and a subdued demand for its delivery services, resulting in a less optimistic annual revenue forecast for the company.
According to a report by the Financial Times, UPS disclosed on Tuesday that the job cuts would predominantly impact managerial positions, affecting roughly 85,000 employees. It foresees about three-quarters of these layoffs within the year’s first half. UPS, boasting a global workforce of 495,000 individuals, does not foresee reinstating these positions in the foreseeable future.
The Delivery Group now envisions revenues ranging between $92 billion and $94.5 billion in 2024, falling short of Wall Street projections set at $95.6 billion. Notably, the company witnessed a 9.3% dip in revenue in 2023, amounting to $91 billion compared to the previous year.
As a significant indicator for the global economy due to its extensive shipping of packages and documents, UPS reported fourth-quarter revenue of $24.9 billion, marking an 8% year-on-year decline and missing Wall Street estimates due to a reduction in average daily parcel volumes.
Additionally, UPS announced its exploration of strategic alternatives for acquiring Coyote, a truckload brokerage business responsible for 38% of the revenue decline in its supply chain solutions business during 2023.
CEO Carol Tomé, addressing the company’s performance, stated, “2023 was a unique and, quite candidly, a difficult and disappointing year.” In conjunction with the workforce reductions, Tomé confirmed a shift to a five-day office workweek for employees.
As a repercussion of these announcements, UPS shares experienced a 7.5% decline in morning trading in New York on Tuesday.
Key Points to Note:
- In July, UPS reached a pay agreement with the Teamsters, representing 340,000 of its 500,000 employees, resulting in a 12.1% increase in union wage rates.
- While the deal averted a potential strike, it prompted UPS to revise its 2023 financial guidance, indicating a potential impact on revenue and margins.
