United Parcel Service (UPS) announced it will eliminate approximately 12,000 jobs, roughly 14% of its managerial workforce, in a cost-cutting move anticipated to save $1 billion. These layoffs, affecting primarily management and contract workers worldwide, come amid a notable decrease in the company’s package volumes and profits.
UPS, a leading logistics and package delivery company, experienced a 31.8% drop in quarterly profit and a more than 9% decline in revenue last year. The company’s Chief Executive, Carol Tomé, described 2023 as a “difficult and disappointing year,” attributing the downturn to a subdued e-commerce demand and increased costs stemming from a new contract with the Teamsters union. This contract resulted in a significant wage increase for part-time workers.
The announced layoffs are expected to be executed globally over the coming months, with a focus on “right-sizing” the organization. UPS is also set to eliminate its hybrid work model, mandating employees to return to the office five days a week starting March 4. This policy shift, according to Tomé, aligns with the company’s strategy to streamline operations.
In the backdrop of these changes, UPS forecasts a challenging 2024, projecting revenues between $92 billion and $94.5 billion, falling short of analysts’ expectations. The company’s stock has also seen a notable decline, dropping over 7% following the announcement.
The impact of the pandemic has been significant for UPS, which saw its business surge to record levels during the initial years but is now grappling with a shift in consumer behavior and increased competition.
This decline reflects broader market trends, where consumer demand for e-commerce, significantly heightened during the pandemic, is normalizing. Additionally, UPS has faced challenges in its international operations, with weakened volumes in both domestic and international markets. The company’s financial results, often seen as a barometer for the U.S. and global economy, indicate a sluggishness in the parcel market.
UPS plans to disclose more details about its productivity improvement strategies at an investor event scheduled for March 26.
