UPS Announces Plans to Reduce Workforce by 12,000 Following a Challenging Year

Parcel delivery company UPS has announced plans to cut 12,000 jobs due to the impact of a weaker economy and a labor dispute that deterred some customers. CEO Carol Tomé acknowledged that 2023 was a challenging and disappointing year for the company but expressed the goal of becoming more efficient by investing in artificial intelligence (AI). In a bid to boost performance, Tomé also called for employees to return to the office five days a week. The job cuts are expected to save UPS $1 billion this year. The company, viewed as an economic health indicator, faced sales and profit declines last year due to a reduction in package volume. Economic weakness in Europe and parts of Asia, along with a potential strike in the US, led some customers to switch to competitors. UPS has since regained 60% of that lost business and expects modest growth in 2023. However, the company's forecast fell short of analysts' expectations and caused a more than 7% drop in shares. UPS also warned that expenses linked to its new contract with the Teamsters union would continue to affect the firm over the next six months. As part of the agreement, full-time drivers were awarded a pay and benefits package worth about $170,000 per year. The planned job cuts represent 2.5% of UPS' global workforce, mainly impacting management positions and contractors. These roles will not be reinstated as the company recovers. UPS is also considering a potential sale of its truckload brokerage business, Coyote. Despite the challenges, Tomé expressed confidence in the future and highlighted the opportunities to enhance productivity through advancements in technology, particularly in generative AI. UPS handles 50 million packages daily in the US and delivers over 30 million parcels globally. Tomé expressed concerns about shipping disruptions due to conflicts in the Red Sea and drought in the Panama Canal, which have hindered normal shipping routes.