UPS Announces Job Cuts of 12,000 in Effort to Save $1 Billion in Costs

In a strategic move aimed at reducing costs, UPS has revealed plans to cut 12,000 jobs, primarily targeting manager and contractor positions. The decision comes as the company seeks to save $1 billion, addressing challenges and disappointing sales projections for the upcoming year.

UPS has adjusted its sales outlook for the year, anticipating global revenue between $92 billion to $94.5 billion. While this would represent an increase from the $91 billion reported in 2023, analysts had expected higher revenue, estimating at least $95.6 billion. The company faced setbacks in the previous year as customers, apprehensive about a potential Teamsters strike, redirected shipments to rival carriers like FedEx.

Although UPS aims to regain the majority of lost business, it has successfully recovered only around 60%. The company, which experienced record-breaking sales in the initial years of the pandemic due to the surge in online shopping, reported sales exceeding $100 billion in 2022. However, in 2023, revenue declined by over 9%, and CEO Carol Tome acknowledged the challenges, describing the situation as “candidly difficult and disappointing” during an investor conference call on Tuesday.

The stock market responded to the news, with UPS (UPS) stocks witnessing a 7% decline on Tuesday. Despite successfully reducing employee headcount from approximately 540,000 to 495,000 through attrition and reduced flying hours in the past year, UPS is now turning to job cuts to further streamline operations.

The company cited several factors contributing to its performance, including disruptions related to labor contract negotiations and increased costs associated with the new contract. The forecast for the US small package market, excluding Amazon, indicates modest growth of less than 1% in 2024. Additionally, a 12.1% increase in union wage rates is driving UPS to focus on cutting costs, with a significant portion of the effort directed towards reducing salaried staff.

UPS, with a global workforce of nearly 500,000 employees, highlighted the shift in its operational approach. Brian Newman, UPS CFO, explained that the job cuts represent a transformation in the way the company operates, emphasizing that these roles are not expected to return even as volume returns to the system.