UPS to Lay Off 12K Employees

Facts

• Delivery company UPS announced Tuesday that it will lay off 12K of its roughly 500K workers this year. This comes after the Teamsters union, which represents around 340K UPS workers in the US, approved a new contract for its members in August that included an average annual pay plus benefits for drivers of $170K, as well as more full-time jobs and air conditioning in new trucks.¹
• The job cuts are expected to impact contract workers and management positions, of which UPS currently has a total of 85K. As the company expects small package volume to increase by less than 1% this year, Chief Executive Carol Tomé said the layoffs are aimed at shifting the company toward utilizing artificial intelligence (AI) and other technologies.²
• As UPS projects its revenue this year to be between $92B and $94.5B, which is below the average target of $95.57B, Tomé said the layoffs are part of an effort to reduce costs in 2024 by $1B.³
• UPS' revenue dropped to $24.9B in the fourth quarter of 2023, which was a 7.8% decline from the same period a year before. While the company's projected 2024 revenue is lower than analysts' expectations, the $92 to $94.5B range would be up 1% to 3.8% growth.⁴
• The company, whose stock price dropped by 8% following the announcement, also said that beginning in March, it will end its hybrid work schedule and require all employees to return to the office five days a week. Meanwhile, UPS' entire 2023 fiscal year saw revenue drop to $91B, down 9.3% from 2022.⁵
• As the company has also considered selling its trucking logistics business Coyote, it has cut back on air freight shipping, especially from China. The current conflict in the Suez Canal has also raised shipping costs by as much as 600%, though it's yet unclear whether air cargo will pick back up.⁵

Sources: ¹CBS, ²The Wall Street Journal, ³Reuters, ⁴Washington Post and ⁵New York Post.

Narratives

• Narrative A, as provided by The Wall Street Journal. UPS has typically not pursued mass layoffs as a fiscal policy, but with the costs of sorting and shipping packages going up, the company needs to consolidate sorting facilities and streamline its technical operations. To make shipping less expensive for customers, UPS will now have to take this freed-up cash and invest it heavily in technology.
• Narrative B, as provided by Diginomica. Corporations have no idea what AI's potential is, let alone what the long-term consequences in the labor force will be. While executives have so far agreed with the optimistic predictions of tech companies, history shows us that they usually choose more profits when technological changes occur. People could very well end up working shoulder-to-shoulder with AI, but they could also end up jobless.

Predictions