United Parcel Service Inc. (UPS) has declared its intent to cut 12,000 jobs in an effort to streamline operations and manage costs more effectively.
The news came during a quarterly earnings call on Tuesday, causing a sharp decline in the company’s stock prices, The Wall Street Journal reported.
UPS CEO Carol Tome expounded on the planned headcount reduction during the Tuesday call, stating that by reducing the company’s headcount, UPS will realize $1 billion in cost savings.
“2023 was a unique, and quite candidly, difficult and disappointing year. We experienced declines in volume, revenue and operating profits and all three of our business segments,” CEO Carol Tomé said.
“We are going to fit our organization to our strategy and align our resources against what’s wildly important,” she added.
The company also indicated that its Coyote truckload brokerage business could be placed on the market, marking a potential strategic shift in its operations.
Furthermore, Tome announced a new policy requiring UPS employees to return to the office for five days a week throughout the year, according to AP.
This development follows the recent approval of a tentative contract agreement between UPS and the Teamsters in September, which concluded intense labor negotiations and averted potential disruptions to package deliveries across the United States.
How it started: UPS drivers to make $170,000 in pay and benefits following Union deal
How it’s going: UPS to slash 12,000 jobs after increased labor costs
A tale as old as time pic.twitter.com/uV1RdmpOYT
— DC_Draino (@DC_Draino) January 30, 2024
Forbes Business reported:
During Tuesday’s earnings call, Tomé blamed UPS’ difficulties on the broader economy, the disruption associated with labor negotiations last summer and the higher costs of a new Teamsters contract. Over the summer, hundreds of thousands of UPS employees who are represented by the Teamsters union nearly walked out after asking the shipping company for a new contract.
In August, the trucking union and UPS came to an agreement on a five-year $30 billion contract that included higher wages and safety protections for drivers. Both the threat of a walk-out and the multi-billion dollar contract affected the company’s finances, Tomé said.
On top of that, the increased number of people doing holiday shopping in person impacted UPS’ revenue, the CEO said Tuesday.
Meanwhile, its relationship with Amazon also had an effect. The company slightly increased its shipping for Amazon in the past year, up from 11.3% in 2022 to 11.8% in 2023, but Amazon is known for negotiating discounts that smaller suppliers don’t necessarily receive. On Tuesday’s call, Chief Financial Officer Brian Newman said the company is focused on health-care customers and smaller businesses that have higher margins.