UPS To Lay Off 12,000 Employees Just Six Months After Teamsters Won Lucrative Deal

2023 was the year that saw multiple labor strikes, and labor wins from organizations seeking better deals for their members. The Actors Union, the Writer’s Guild, and the Teamsters Union all struck – or threatened to strike – for weeks and months over the summer of 2023 in order to win significant deals for their members, but now it appears that UPS is not upholding their end of the deal

UPS Union Workers Won

The Teamsters union, in negotiation with UPS, saw unionized workers land a deal that would see delivery drivers earning an average of $170,000 in annual pay and benefits at the end of the five year contract. This is a significant wage increase for workers who have been, in their words, increasingly overworked and undervalued in America.

Many people celebrated this win, especially as it came around the same time that the Actor’s Union and the Writer’s Guild both won significant concessions for their members as well. For many, unions were on the up again, enjoying more public support for their endeavors than they had enjoyed since the 60’s.

A Disappointing Earnings Call

However, the Q4 earnings call revealed some unfortunate numbers, according to UPS. The CEO of the company, Carol Tome, said, “2023 was a unique, and quite candidly, difficult and disappointing year.”

She went on to explain, “We experienced declines in volume, revenue, and operating profits in all three of our business segments.” These would be concerning words for any company, because these are generally reasons that CEO’s use to order mass cuts.

Reasons Behind Poor Profits

Tome blamed the weak performance of the company on increased labor costs, challenges in the broader economy, freight complications abroad, and last, but not least, the disruption that was tied to labor negotiations in the summer of 2023.

This last factor she blamed for rival companies seeing a boost during the summer months. And she’s not entirely wrong. During the summer months, when rumors of negotiations going south between the Teamsters and UPS were made public, many companies chose to switch their shipping preferences to other companies temporarily, in order to avoid disruption of their own businesses.

Large Cuts to Save on Costs

The result of the earnings call is that the company will be making, as predicted, large cuts in order to save on costs and attempt to boost profit. The massive number, 12,000 workers, might make many people turn their head in disbelief, but there’s a deeper story to the numbers.

The mass layoffs mostly target management-level and contractor positions. Contractor positions are, by nature, more fluid that standard employees, so it isn’t like UPS is suddenly laying off union workers after they won such massive gains in their contract last summer.

Declining Revenue

These cuts come after the numbers reveal that UPS saw its revenue decline by nearly 10% in 2023, to $91 billion from $100.3 billion in 2022. They also come ahead of what is projected to be a disappointing year for 2024, with a sales outlook approximately $1 billion short of Wall Street analysts expectations.

The drop in business and revenue in 2023 can be easily explained, primarily by the strike action that was threatened by the Teamsters union. The Teamsters represents approximately 340,000 UPS workers across the United States, and led in what were reportedly incredibly heated contract negotiations.

An Excellent Contract

The contract that the Teamsters ultimately won secured higher wages for both full – and part-time UPS workers, as well as workplace protections like air conditioning in UPS trucks.

These wins didn’t come before customers switched their business to other carriers, like FedEx, though, in order to protect their shipments. Many also switched their business in solidarity with the Teamsters and the UPS workers, in order to pressure UPS as a company to reach a fair deal with their employees.

Reassuring Shareholders

Tome assured shareholders during the earnings call that UPS had won back nearly 60% of the business that they lost during the negotiations last summer. This was a clear attempt to soften the blow of the low earnings.

Her statement also directly contradicts the claim made by FedEx Chief Customer Officer Brie Carere. She stated in December that her company was “holding on to all of the share” that it had taken from UPS during the summer of contract negotiations.

International Affairs Affecting Shipping As Well

The union negotiations are not the only thing that affected UPS’s revenue last year, though. International affairs, including a “softness in Europe” as well as the freight complications that are occurring in the Red Sea region impacted profitability as well.

UPS has tried to stay head of these dips in profit by cutting more and more employees, from a record high of 540,000 during the coronavirus pandemic to approximately 495,000 by the end of 2023. These jobs don’t appear to be coming back as business resumes, and the new announced layoffs only make things tighter at UPS.

The Change At UPS

UPS is not the only company adapting to a new work, and using fewer employees to do so. Tome stated that the new way of working is called “Fit to Serve” for the company, and that it’s part of adjusting the way that the company does business.

It has caused some instability in the stock price for UPS, but these things are fluid. Whether UPS will see the error of their ways and hire back their employees is hard to say, but ultimately the shipping giant is trying to adapt to a new way of living and working in a modern world, the same as everybody else.