The United Parcel Service (UPS) announced on Tuesday that it will lay off more than 12,000 members of its management staff, a 14 percent reduction intended to save the company over $1 billion. The impending layoffs, which were disclosed during the UPS fourth quarter earnings call, come just five months after UPS averted a union strike by giving its drivers massive pay and benefits increases.
In a company conference call on Tuesday morning, UPS CEO Carol Tome announced the headcount reduction as a way to “fit our organization to our strategy and align our resources against what’s wildly important.” The company will also be mandating a return to the office for its employees, ending a lingering pandemic-era remote work system. It is estimated that the layoffs will lead to $1 billion in cost savings.
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According to Bloomberg, Tome cites softening demand for package delivery and, more notably, soaring union labor costs as reasons for the cutback.
As Valuetainment previously reported, UPS managed to avoid a Teamsters strike in August of last year after granting the union a new five-year labor contract. Per the terms of the agreement, which applies to more than 340,000 UPS workers in the United States, starting wages were increased to $21 an hour, and full-time drivers were eligible to make up to $170,000 in wages and benefits by the end of the contract.
At the time of the agreement, UPS lowered its yearly profit forecast to account for higher labor costs, and experts warned that shipping fees would likely increase as well. However, according to company executives, these measures were still not enough to offset the union’s demands.
Related: UPS Job Applications Increase After Union Secures $170,000 Paychecks
Profits for UPS in the quarter ending in December decreased by 50 percent, falling from $3.45 billion to $1.61 billion (or $3.45 per share to $1.87). Following the announcement of the layoffs, company shares dropped by 9 percent in Tuesday morning trading.
The company is also reportedly weighing the option of putting its Chicago-based Coyote truck load brokerage business up for sale. UPS acquired the company for $1.8 billion in 2015.
The staffing shakeup at UPS coincides with several other high-profile downsizings at major companies. On Tuesday, it was also announced that PayPal will be reducing its workforce by about 9 percent, less than a week after other tech players like Microsoft and Google made similar cuts.
Connor Walcott is a staff writer for Valuetainment.com. Follow Connor on X and look for him on VT’s “The Unusual Suspects.”
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