UPS announced it will cut approximately 12,000 jobs in an effort to save $1 billion in costs.

According to CNBC, CEO Carol Tomé announced the workforce cuts on a company earnings call.

The company fell short in fourth-quarter revenue as domestic and international shipping declined.

“2023 was a unique, and quite candidly, difficult and disappointing year. We experienced declines in volume, revenue and operating profits and all three of our business segments,” Tomé said, according to CNBC.

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CNBC reports:

For the last three months of 2023, UPS reported net income of $1.61 billion, or $1.87 per share, compared with $3.45 billion, or $3.96 per share, a year earlier. Adjusting for one-time items related to pensions and intangible assets, UPS earned $2.47 per share.

Revenue declined 7.8% to $24.9 billion from $27 billion last year.

The company reported a 7.4% drop in average daily volume domestically and an 8.3% decrease internationally. Tomé said the international softness was “heavily weighted” in Europe, coupled with freight complications in the Red Sea region, as well as the Panama and Suez canals.

Though the earnings report did not directly mention any financial impacts from negotiations with the Teamsters in August over labor contracts, Tomé cited the talks and the macroeconomic environment more broadly as contributing to the “disappointing” year.

DC Draino cited the union deal UPS employees struck in 2023, which would give drivers $170,000 in pay and benefits.

From CBS News:

UPS drivers will earn an average of $170,000 in annual pay and benefits at the end of a five-year contract agreement, UPS CEO Carol Tomé said during an earnings call this week.

The executive’s comments punctuated the end of a weekslong struggle between UPS and the Teamsters Union which negotiated with the carrier last month to avert a strike and secure a new contract for 340,000 union employees. More than 70% of UPS’ 443,000 employees are represented by the Teamsters’ Union, the company’s website shows.

“We expected negotiations with the Teamsters to be late and loud, and they were,” Tomé said during the call. As a result, UPS slashed its full-year revenue forecasts “primarily to reflect the volume impact from labor negotiations and the costs associated with the tentative agreement,” she added.

The deal, which was reached on July 25, will increase full-time workers’ compensation to $170,000 from roughly $145,000 over five years, according to UPS’ calculations. It will also boost part-time workers’ salaries to at least $25.75 per hour, and end mandatory overtime, Tomé told investors on Tuesday.

Online searches for jobs with “UPS” or “United Parcel Service” in the title jumped 50% in the week after the new pay deal was announced, Bloomberg News reported, citing data from Indeed.

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CNN Business noted managers and contractor positions make up the majority of layoffs.

Per CNN Business:

The job cuts come as UPS issued a disappointing sales outlook for this year, saying it expects global revenue of between $92 billion to $94.5 billion. That would be up from the $91 billion in revenue it reported for 2023, but analysts surveyed by Refinitiv had been expecting revenue of at least $95.6 billion.

UPS lost business last year as customers concerned about a possible strike by the Teamsters shifted shipments to rival carriers, such as FedEx. Although UPS said it expects to get most of that business back, it had won back only about 60% of that lost business.

UPS’ business surged to record levels in the first three years of the pandemic, as online shopping exploded. The company’s sales topped $100 billion for the first time in 2022. The fact that revenue in 2023 fell more than 9% and won’t top that benchmark again in the near future is “candidly difficult and disappointing,” said CEO Carol Tome on a conference call with investors Tuesday.

“Some of this performance was due to the macro environment and some due to disruptions associated with our labor contract negotiations as well as higher costs associated with the new contract,” she said.

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