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That Flushing Sound You Hear Is Brown Jobs at UPS – HotAir

January 31, 2024
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That Flushing Sound You Hear Is Brown Jobs at UPS – HotAir

Yesterday was a pretty fugly day at United Parcel Service (UPS). We’re heavy into reporting season, the freight company had to announce their earnings, and it amounted to a bummer of a call as far as those went.

…“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,” [CEO Carol] Tomé said.

…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.

In what should be alarming numbers for anyone watching the overall state of our #Bidenomics buffeted economy, UPS lost money because they just didn’t have as much to move, both here and abroad. Part of that weakness is shaky economies globally (the Germans are a terrific example), and the impact of all the conflicts impacting shipping, and shipping routes, like the Suez/Red Sea situation. Plus lingering effects from the ongoing Ukrainian War, and whatever other hot spots no one seems able to put a lid on.

…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.

Another big reason for their reduced volume is the angst and uncertainty of the strike the Teamsters authorized against them in August. Just because the drivers, etc., didn’t actually walk off the job and paralyze the company for weeks doesn’t mean the uncertainty of committing a shipment to UPS in the throes of hostile negotiations with the union didn’t take its toll on volume. Businesses shipping freight were already headed to the exits looking for secure alternatives rather than trust the fates at UPS.

UPS has regained only a little over half of the business they’d lost due to the strife…

…UPS has won back nearly 60% of its shipping volume lost during contentious union talks last summer when customers who were nervous over a potential strike shifted to competitors. Tomé is trying to win back the rest of that volume without lowering prices, which would only hurt margins.

…but now they have a big, fat new labor contract to pony up for on top of it. Drivers will soon be making $170K pay and benefits, and well as raises for all the folks on the ladders behind them.

What to do to cover that freight?

Somebody’s gotta go.

And it’s not 12,000 Teamsters members…not just yet.

Carol Tomé changed United Parcel Service Inc.’s. management theme to “Better and Bolder” during contentious labor-union talks last year, leaving investors wondering what the chief executive officer meant. They know now.

On Tuesday, after reporting disappointing earnings, UPS announced it would save more than $1 billion by cutting 12,000 of its 85,000 management jobs. The company also will demand that workers be in the office five days a week. And it will study selling its trucking brokerage business, which has slumped amid a freight recession.

…The jobs cuts, likely the largest in UPS’s 116-year history, were made possible by new technologies including artificial intelligence, Tomé said. Citing one example, she said that machine learning allows salespeople to put together proposals without having to get pricing information from executives.

UPS had previously warned that its new labor deal for about 340,000 union members would hurt profit in the first half because a good part of the wage increases come through in the first year.

Part of the irony of these management lay-offs is that many of those folks worked their way up from being drivers or the part-time box boy help. So the company isn’t divesting itself of simply another desk jockey, but accumulated dirty hands, real-time shipping and freight knowledge, which AI and salespeople often don’t have but need to keep the wheels greased. Also, you have the specter of people who have spent literally a working lifetime at UPS – representing the upward mobility dream not possible in so many other business spheres – being turned out on their ear for bean counters.

…Glenn Gooding, an industry consultant with iDrive Logistics and a former UPS executive, said that the job cuts will only accelerate a change in UPS’s culture, which in the past saw more top executives rise to the top after starting their careers as delivery drivers or package handlers.

“It will not boost morale,” he said. “Invariably they cut out a lot of real contributors and a lot of knowledge.”

The union had best enjoy its gains while it has them coming in. Because the auguries do not look good when one re-throws the bones.

The Chicago Purchasing Managers’ Index (CPMI), a closely watched survey of the manufacturing health in the Chicago area, shrank again last month.

That’s not indicative of growth, less mind a healthy enough economy to carry contracts like these unions have been getting all last summer.

If I had those new big Brown bucks starting to come in, I think I’d be prudent with them for a while.

They may be a temporary high.



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