United Parcel Service (UPS) announced on April 29, 2025, that it plans to cut approximately 20,000 jobs and close 73 facilities as part of a significant restructuring effort aimed at reducing costs and adapting to changing market conditions. This decision comes in light of a substantial reduction in shipping volumes from Amazon, UPS's largest customer, which is expected to decline by more than 50% by mid-2026.
The job cuts will affect just over 4% of UPS's workforce, which totals around 490,000 employees globally. This move follows a previous layoff announcement in January 2024, when the company eliminated 12,000 positions due to a decline in revenue. UPS's CEO, Carol Tomé, emphasized the necessity of these actions, stating, "The actions we are taking to reconfigure our network and reduce cost across our business could not be timelier. The macro environment may be uncertain, but with our actions, we will emerge as an even stronger, more nimble UPS."
The company expects to save about $3.5 billion in 2025 as a result of these layoffs and facility closures, which are part of a broader strategy to consolidate operations and enhance profitability. UPS's first-quarter financial results showed a revenue of $21.5 billion, slightly down from $21.7 billion during the same period last year, but still exceeding Wall Street expectations of $21.05 billion.
UPS's CFO, Brian Dykes, noted that the layoffs and facility closures are designed to improve the company's U.S. domestic operating margin and overall profitability. "These actions will enable us to expand our U.S. Domestic operating margin and increase profitability," he said during a conference call with investors.
The decision to reduce Amazon shipments comes after UPS and Amazon entered a partnership nearly 30 years ago. However, Tomé pointed out that while Amazon is UPS's largest customer, it is not the most profitable one. "Its margin is very dilutive to the U.S. domestic business," she explained in a previous earnings call.
In a statement, an Amazon spokesperson acknowledged the partnership, saying, "Due to their operational needs, UPS requested a reduction in volume and we certainly respect their decision." The spokesperson also mentioned that Amazon had offered to increase UPS's volumes prior to the decision to cut back.
UPS's restructuring comes amid broader economic challenges, including rising tariffs imposed by the Trump administration, which have affected global trade dynamics. Recently, the U.S. implemented new tariffs of up to 145% on many Chinese goods, which has further complicated shipping operations. Tomé highlighted the impact of these tariffs, stating, "The world hasn't been faced with such enormous potential impacts to trade in more than 100 years."
UPS's operations have been significantly impacted by these trade tensions, particularly with regard to shipments from China. The company noted that its China to U.S. trade lanes represented about 11% of its total international revenue last year. As a result of the tariffs, UPS is already seeing a decline in volume from China-based sellers, including popular e-commerce platforms like Shein and Temu, which are facing increased import charges.
In addition to the job cuts and facility closures, UPS is also reviewing its entire network and may identify more operational closures in the future. The company announced that it plans to shut down at least 164 facilities by the end of 2025, with 73 of these closures expected by June of this year.
Despite the challenges, UPS remains optimistic about its long-term prospects. The company has forecasted a full-year revenue of approximately $89 billion for 2025. However, it has refrained from providing specific guidance for the rest of the year due to ongoing economic uncertainty.
As the largest package delivery firm in the world, UPS's decisions are closely watched as indicators of broader economic trends. The company's ability to adapt to changing market conditions will be crucial in navigating the challenges posed by shifting consumer habits and international trade policies.
In the wake of these announcements, UPS shares experienced a slight decline of 0.6%, reflecting investor concerns over the company's restructuring efforts. However, analysts remain hopeful that these cost-cutting measures will ultimately position UPS for a more profitable future.
With the impending changes, UPS is gearing up for the peak holiday season, a critical time when daily deliveries can more than double. The company is actively planning to ensure it can meet the demands of its customers during this busy period.
Overall, UPS's recent announcements underscore the complexities of operating in a rapidly changing economic landscape, where adapting to new realities is more important than ever. As the company embarks on this journey of restructuring, it will be essential for UPS to balance cost-cutting measures with maintaining service quality and customer satisfaction.
