UPS announced on Tuesday its decision to slash 12,000 positions, marking a significant downsizing move mere months after sidestepping a potentially crippling strike through the negotiation of a fresh labor agreement.
In August, the Teamsters ratified a tentative five-year contract with UPS, bringing closure to a protracted series of labor talks that had loomed over the smooth functioning of package deliveries for countless businesses and households nationwide.
With a workforce of approximately 500,000 employees, UPS aims to generate $1 billion in cost savings by streamlining its personnel, as articulated by CEO Carol Tome during a conference call on Tuesday morning.
UPS jobs cut (Credits: WXII 12)
Additionally, UPS intends to mandate a return to the office for its employees five days a week this year, aligning organizational structures with strategic imperatives.
The announcement triggered a nearly 9% decline in UPS shares on Tuesday. Despite forecasting 2024 revenues from $92 billion to $94.5 billion, the company’s projections fell short of Wall Street’s anticipated figure, which surpassed $95.5 billion.
According to FactSet analyst consensus, revenue in the fourth quarter also failed to meet expectations, registering a 7.8% decline to $24.9 billion, slightly below the projected $25.31 billion.
Quarterly profits for the period ending in December plummeted by over half to $1.61 billion, or $1.87 per share, from $3.45 billion, or $3.96 per share. Adjusted earnings per share stood at $2.47, marginally exceeding the average estimate reported by FactSet.
Under the terms of the newly ratified union contract, UPS drivers are slated to receive an average annual compensation package totaling $170,000 by the agreement’s conclusion.
The deal, covering approximately 340,000 UPS employees across the U.S., was anticipated to usher in additional full-time positions and ensure the provision of air-conditioning in new delivery vehicles.
UPS joins a cohort of major U.S. corporations implementing workforce reductions in 2024 amidst projections of subdued economic expansion.
Earlier this month, Google, a subsidiary of Alphabet, initiated layoffs affecting hundreds of employees across its hardware, voice assistance, and engineering divisions as part of cost-cutting measures.
Similarly, tech giants such as Microsoft and business software titan Salesforce have announced substantial workforce reductions, while prominent retailers including eBay, Levi Strauss & Co., Macy’s, and Wayfair have unveiled plans to trim their employee bases.
Economists anticipate a deceleration in labor market growth this year, although a consensus prevails that the U.S. economy will evade a recession. Notably, robust job creation characterized 2023, adding 2.7 million positions across various sectors.
