United Parcel Service plans to cut about 12,000 jobs this year as the company tries to cut costs due to declining package volume and higher wages tied to a new union contract signed over the summer.
UPS Chief Executive Carol Toomey told analysts on an earnings call Tuesday that it has been a “difficult and disappointing year.” Revenue fell by more than 9 percent last year and profits fell by a third.
Ms. Toomey said most of the job cuts would occur in the first half of the year and would reduce spending by about $1 billion. UPS employs approximately 500,000 people.
UPS narrowly avoided a strike over the summer when the union representing more than 300,000 of its workers, the International Brotherhood of Teamsters, threatened to walk off if a labor agreement that included higher wages was not reached. A contract was agreed upon shortly after the previous agreement expired, but uncertainty about a potential walk-off has hurt the company’s package volumes. UPS said about 60 percent of the volume lost during the outage had been returned by the end of December.
According to the Teamsters, the positions that will be eliminated this year are not union jobs. A statement from UPS said the layoffs would impact managerial employees “around the world and in all operations.” The moves reflect “a change in the way we work,” Ms. Toomey said, and even if business improves, those jobs may not come back, she said. He said employees will also be expected to work from the office five days a week.
UPS said wages for unionized workers increased 12 percent in the fourth quarter as a result of the new contract. The company said it reduced workers’ hours by about 10 percent last quarter to minimize the impact on profits.
UPS shares fell more than 8 percent Tuesday morning.
The company said it expects package volumes to continue to decline in the first half of this year, before registering positive growth in the second half. The company’s weak demand forecast and job cuts contrast with recent economic indicators showing signs of resilient global growth and an economic “soft landing,” defying predictions of a deep recession.
Still, the number of workers laid off across the United States rose slightly in December, according to Labor Department data. released on tuesday, And many tech and media companies have announced mass layoffs in recent months.
While the overall layoff rate is lower than pre-pandemic levels, some industries are feeling it more than others. “If you’re in those industries, it’s probably feeling pretty uncomfortable right now,” said Julia Pollack, chief economist at ZipRecruiter.