- Global courier UPS is cutting 20,000 jobs and automating hundreds of facilities as it tries to boost profitability in the midst of a massive overhaul of its delivery network. Earlier this year, the company announced an ambitious plan to decouple from Amazon in favor of more profitable packages—just before Trump’s tariff announcements sent global trade volumes plunging.
United Parcel Service made waves earlier this year when it announced a breakup with the world’s largest ecommerce retailer. Amazon, a competitor as well as a customer bringing in over one-tenth of UPS’ revenue, had turned unprofitable for the shipper, and in January of this year, UPS announced plans to slash the volume it delivered for Amazon by 50% in about a year and a half.
“They are our largest customer, but they are not our most profitable customer,” UPS CEO Carol Tomé said in an interview with Bloomberg Television, describing the move as “taking control of our destiny.”
Three months later, that destiny has become clearer as UPS announces plans to slash 20,000 jobs, close 73 facilities, and retool its shipping network to use less human labor—changes the shipper said were “in line” with the Amazon volume it was losing, but also set it up to be more profitable going forward.
“We are executing the largest network reconfiguration in our history,” Tomé said on the company’s earnings call Tuesday after announcing the changes.
The Amazon deliveries UPS is dropping are “not profitable for us, nor a healthy fit for our network,” she said. What’s more, UPS plans to increase automation, she said, which will “lessen our dependency on labor [and] reduce the capital requirements needed to run the network.”
About half of the buildings to be closed are in the eastern U.S., CFO Brian Dykes said. The 20,000 jobs cut will “be made across the entire U.S. network.”
UPS’ modernization push, parts of which have been previously announced, involves consolidating and closing 200 sorting facilities over five years. Under the plan, nicknamed “Network of the Future,” the shipper has been automating package sorting; it’s also looking at using robotics for tasks like loading and unloading trailers and applying labels, Tomé told investors.
Ultimately, some 400 facilities in UPS’ network will be partially or fully automated, Nando Cesarone, president of U.S., told investors. “The end result will be a much more efficient operation with less dependency on labor,” he said.
That’s unwelcome news to the Teamsters union, which represents about 350,000 UPS workers, and which also bargained a historic contract for its workforce two years ago.
“If UPS wants to continue to downsize corporate management, the Teamsters won’t stand in its way,” Teamsters President Sean O’Brien said in a statement. “But if the company intends to violate our contract or makes any attempt to go after hard-fought, good-paying Teamsters jobs, UPS will be in for a hell of a fight.”
Shipping uncertainty ahead
UPS’ decoupling from Amazon may be the easy part of its reconfiguration, however. Weeks after it announced that change, President Donald Trump announced tariffs on U.S. trading partners, effectively raising consumer prices on thousands of goods and launching the nation into a series of high-stakes renegotiations with dozens of nations. Currently, importers are paying a baseline 10% tariff on all imports and 145% on most imports from China, while varying rates of “reciprocal tariffs” on almost 60 countries are set to kick in this summer.
That upheaval meant fewer shipments for UPS in February and March, and led the shipper to yank earnings guidance for the rest of the year.
“The world hasn’t been faced with such enormous potential impacts to trade in more than 100 years,” Tomé said. “The only thing we’re certain of is we don’t know which, if any, of our scenarios will play out.”
Only about 2% of UPS’ volume comes from international packages, executives said. Still, UPS’ China-to-U.S. trade lines are the company’s most profitable, Tomé told investors. But as that route dries up, the company sees demand growing in shipments from China to the rest of the world, as well as from Europe, Thailand, and Vietnam.
The company is expecting a 9% drop in U.S. shipping in the second quarter and a modest drop in revenue.
“There’s so much uncertainty around China, now it’s been announced,” Tomé said. “We don’t know actually what will happen. We don’t know if it will fit. There are many things we don’t know.”
This story was originally featured on Fortune.com
