United Parcel Service (UPS) has significantly reduced its workforce by 48,000 employees since last year as part of a strategic effort to boost profits and regain investor confidence. The delivery giant, which began the year with nearly half a million employees, has seen the majority of these cuts impact its frontline workers.
Key takeaways
- Approximately 70% of the layoffs have affected drivers and warehouse personnel.
- The company aims to deliver long-term value through these strategic changes.
- UPS’s stock saw a notable increase following the announcement and better-than-expected quarterly results.
Workforce reduction details
Of the 48,000 positions eliminated, 34,000 were cut this year from the ranks of drivers and warehouse workers, primarily in the United States. An additional 14,000 management positions were reduced, with those cuts beginning last year. This move comes as UPS seeks to improve its financial performance, with its stock price having lagged the broader market.
Company’s strategic shift and financial performance
UPS Chief Executive Carol Tomé stated that the company is undergoing its "most significant strategic shift" to ensure long-term value for all stakeholders. Despite a decline in net income to $1.3 billion in the third quarter from $1.5 billion a year prior, and a revenue drop from $22.2 billion to $21.4 billion, executives highlighted positive developments. Revenue per package in the U.S. increased by 10 percent year-over-year in the third quarter.
Union relations and external factors
Many UPS employees are members of the Teamsters union. While the union had previously warned against job cuts not aligned with their labor contract, UPS stated it is in compliance with the contract’s terms. The company’s business has also been affected by external factors, including tariffs imposed this year, which led to a nearly 30 percent decrease in package volume from China. Furthermore, UPS has reduced its parcel delivery business for Amazon, deeming it unprofitable.
Market reaction
The news of the workforce reductions, coupled with stronger-than-anticipated third-quarter earnings, led to a 7 percent surge in UPS’s share price on Tuesday. However, even with this rally, the company’s stock remains down by nearly a quarter year-to-date, contrasting with the S&P 500 index’s 17 percent gain.
Sources
- UPS Has Already Cut 48,000 Workers This Year, The New York Times.
