United Parcel Service Layoffs: Company announces 12,000 job cuts, here's why
CEO Carol Tomé of United Parcel Service Inc. (UPS) is attempting to combat lackluster demand and rising union labor expenses by laying off 12,000 employees and perhaps selling its Coyote truck brokerage division.
Tomé said that the company expects to save $1 billion this year as a result of the employment reductions during a Tuesday earnings conference call. Furthermore, UPS intends to ask staff members to come to work five days a week starting in 2024.
UPS shares saw a drop of as much as 7.6% in early U.S. trading after this statement. The move was made in response to UPS's announcement of a 9.3% decline in yearly sales; the business anticipates a little increase of as little as 1.1% in 2024. A 7.5% overall drop in fourth-quarter delivery volumes was caused by soft demand in both Europe and the United States.
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Higher labor expenses and lower package demand as a result of the difficult business climate caused fourth-quarter revenues and 2024 guidance to fall short of analysts' estimates. For its truck brokerage business, which has seen a drop in sales due to a freight recession characterized by declining rates and overcapacity, UPS is currently looking into other tactics.
CEO Carol Tomé stressed that 2023 was a distinct and challenging year. Throughout it all, we maintained our approach, concentrated on the things we could control, and fortified our base for future expansion."
Tomé is attempting to recover business that was lost during the tense union negotiations held the previous summer. As more people shopped in stores during the post-pandemic holiday season and as inflation reduced purchasing power, the demand for shipping decreased. Tomé had earlier issued a warning that the large salary hikes in the first year of the new labor agreement would hurt the company's profit in the first half. She emphasized UPS's emphasis on improving efficiency and moving toward more profitable deliveries, such as medical supplies, on Tuesday.
Sales in 2024 are predicted to be between $92 billion and $94.5 billion, which is less than the $95.7 billion midpoint that Bloomberg News's survey of analysts predicted. Profit margins will be under pressure from the labor agreement, which goes into force on August 1, as well as the sales forecast. UPS projects an adjusted operating margin of 10% to 10.6% for 2024.
UPS has lowered its air freight flights due to sluggish demand, especially from China, and surplus capacity resulting from airlines expanding their international schedules. A move in commerce towards air cargo could be influenced by the recent disruptions to shipping in the Suez Canal and the constraints imposed by the drought in the Panama Canal.
In March, at an investor meeting, CEO Carol Tomé will outline the company's long-term objectives. Revenues for the fourth quarter came in at $24.9 billion, just less than experts had predicted, while adjusted earnings per share came in at $2.47, down 32% from a year earlier. The board of UPS has authorized a $1.63 quarterly dividend per share, with $4.5 billion in capital expenditures anticipated.
The Source : ibmot
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