UPS to cut 12,000 jobs in cost-cutting move amidst revenue decline

United Parcel Service (UPS) is set to reduce its workforce by approximately 12,000 jobs this year in a cost-cutting initiative driven by declining package volumes and increased labor expenses tied to a summer union contract. CEO of UPS Carol Tomé conveyed the challenges of a “difficult and disappointing year” during an earnings call on Tuesday, revealing a revenue drop of over 9 percent and a one-third decline in profit.

Most of the job cuts are anticipated in the first half of the year, aiming to trim expenses by around $1 billion. UPS, with nearly 500,000 employees, narrowly avoided a strike last summer when the International Brotherhood of Teamsters, representing over 300,000 workers, threatened to strike if a labor agreement with higher wages wasn’t reached. While a settlement was eventually reached, the uncertainty surrounding a potential strike impacted the company’s package volumes.

The job cuts slated for this year will not affect union jobs, according to the Teamsters. Instead, the layoffs will impact managerial staff globally and across all functions. UPS highlighted that this restructuring signifies a “change in the way we work,” with no guarantee of job reinstatement even if business conditions improve. Additionally, employees are expected to work from the office five days a week.

In response to the new contract, UPS reported a 12 percent increase in wages for unionized workers in the fourth quarter. To mitigate the impact on profits, the company reduced workers’ hours by about 10 percent in the last quarter. This news led to a more than 7 percent drop in UPS shares on Tuesday.

Despite weak demand projections and impending job cuts, UPS anticipates package volumes to decline in the first half of the year and then rebound in the second half. These developments contrast with recent economic indicators suggesting robust global growth and signs of a potential economic “soft landing,” contrary to predictions of a more severe downturn. However, recent Labor Department data indicated a slight uptick in layoffs across the United States in December, and some industries, including tech and media, have announced significant job reductions in recent months.

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