FedEx Corp. is laying off an undisclosed number of workers across the organization, despite posting stronger-than-expected quarterly results last week, as the company strives to hit targets for right-sizing the company. Meanwhile, parcel delivery rival UPS (NYSE: UPS) will eliminate more than 300 positions at its regional air hub in Ontario, California, because of slower volume.
In an unrelated move, FedEx Supply Chain Solutions said it plans to release more than 300 workers at a Georgia distribution center because the client is switching locations.
A pilot at FedEx (NYSE: FDX) said some of the layoffs involved non-union professional pilot instructors, some of whom are friends. The instructors are retired pilots or pilots hired off the street to teach at the training facility in classrooms and simulators.
Other instructors who flex between flying missions and teaching were not impacted. The move essentially reduces some of the pilot surpluses. The source asked not to be identified so as not to jeopardize employment status.
“We made the difficult decision to reduce a small percentage of positions as we streamline and realign functions. Decisions of this nature are never made lightly and are the result of much thought and consideration for the needs of our business,” FedEx said in a statement to FreightWaves. “We are actively working with those affected by these changes to ensure they have the support they need during this transition.”
FedEx CEO Raj Subramaniam informed employees of the job cuts, which occurred in multiple areas of the corporation, in an internal memo on March 21.
“Transformation is not easy. It comes with difficult decisions, changing structures, and new ways of working. … Our ability to continue to grow operating income in this difficult environment will depend on continued rigor in our DRIVE and transformation efforts that optimize our business and deliver profitable growth,” he said.
A company spokesperson declined to provide specific details about the workforce reduction.
Under pressure from Wall Street in 2022 to improve profits, FedEx launched DRIVE, a holistic campaign to root out $4 billion in structural and overhead costs by 2026. Leadership also acknowledged that operating three separate networks for express parcel, deferred parcel and freight shipments was uneconomical. Integration of people, facilities and technology across those divisions is underway and expected to deliver $2 billion in additional annual savings.
Last year, excluding Amazon, the package market in the U.S. dropped by 2.4 million packages a day.
Separately, FedEx’s contract logistics unit will release 326 workers at a warehouse in Union City, Georgia due to the client shifting business to another location. The layoffs will take place in two phases, beginning on April 8. According to a notice filed with the state of Georgia’s Office of Workforce Development in February, the facility is being closed and operations transferred to a facility in Jackson, Georgia.
Third-party logistics providers commonly operate dedicated facilities for specific customers and exit leases for those buildings when the business relationship ends because the company wants to relocate, find another partner or downsize for financial reasons.
UPS job losses
UPS, which is also adjusting to lower demand and higher operating costs from the new Teamster contract signed last year, plans to terminate 333 workers at its regional air hub at Ontario International Airport in California next month.
In a notice to the state Employment Development Department, the integrated delivery company said the layoffs are necessary because of lower air volumes. The Daily Bulletin, a local newspaper, first reported the airport reductions, which include supervisors and employees who process packages.
In 2023, UPS revenue was down 9.3% and adjusted operating income fell 28.7% to $9.9 billion.
In January, the company said it would cut 12,000 full- and part time management and contract jobs in response to the weak performance. Headwinds include a reset of an overheated parcel market, greater competition from Amazon and the U.S. Postal Service and sharply higher labor costs associated with last year’s new Teamster contract.
UPS is also consolidating sort centers to gain efficiency through technology and economies of scale. Facilities that handle fewer packages are candidates for closure.
Management has said it expects the first quarter to be the most difficult of the year before profits improve in the second half.
UPS is also cutting dozens of jobs at its Charlotte, North Carolina, delivery center and laying off 331 people at a sort center that will be closed in Portland, Oregon, because of slow throughput, according to the Charlotte and Portland Business Journals.
“We continue to right-size our network and staffing to meet volume demands and maintain industry-leading service. Our employees are extremely important to us, and we are working to place as many employees as possible in other positions. We remain committed to working with them throughout this transition and providing support,” said UPS in a statement.
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Twitter: @ericreports / LinkedIn: Eric Kulisch / ekulisch@freightwaves.com
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