United Parcel Service plans to cut about 12,000 jobs this year as the company tries to cut costs amid falling package volumes and higher wages tied to a new union contract it signed in the summer.
UPS CEO Carol Tomé told analysts on an earnings call Tuesday that it had been a “difficult and disappointing year.” Revenue fell more than 9 percent last year and profits fell by a third.
Tomé said most of the job cuts would come in the first half of the year and would reduce spending by about $1 billion. UPS employs nearly 500,000 people.
UPS narrowly avoided a strike in the summer when the union representing more than 300,000 of its workers, the International Brotherhood of Teamsters, threatened to walk off the job if a labor agreement that included higher wages was not reached. A contract It was agreed to shortly after the previous agreement expired, but uncertainty over a possible withdrawal has hurt the company's parcel volumes. UPS said about 60 percent of the volume it lost during the standoff had returned by the end of December.
The positions that would be eliminated this year are not union jobs, according to the Teamsters. Instead, the layoffs will affect management staff, “around the world and in all functions,” according to a UPS statement. The measures reflect a “change in the way we work,” Tomé said, and even if business recovers, those jobs may not recover. Employees are also expected to work from the office five days a week, he added.
UPS said it had recorded a 12 percent increase in wages for unionized workers in the fourth quarter as a result of the new contract. To reduce the impact on profits, the company said it reduced worker hours by about 10 percent last quarter.
UPS shares fell more than 8 percent Tuesday morning.
The company said it expected parcel volumes to continue falling in the first half of this year, before posting positive growth in the second half. The company's weak demand forecasts and job cuts contrast with recent economic indicators showing resilient global growth and signs of a economical “soft landing” defying predictions of a deeper recession.
Still, the number of laid-off workers across the United States rose slightly in December, according to Labor Department data. released on tuesday. And several technology and media companies have announced big layoffs In recent months.
While the overall layoff rate is low compared to pre-pandemic levels, certain industries are feeling it more than others. “If you're in those industries, you're probably feeling pretty uncomfortable right now,” said Julia Pollak, chief economist at ZipRecruiter.
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