Topic of the week: UPS to Offer Buyouts to Unionized Drivers Amid Network Optimisation Efforts
UPS, the global logistics company, has announced plans to offer voluntary buyouts to its unionized delivery drivers as part of its efforts to align its workforce with the downsizing of its domestic ground network and Amazon business. The move is expected to result in the elimination of 20,000 front-line positions, a significant reduction in the company's workforce.
The buyout offer, which includes a "generous financial package" and earned retirement benefits, is aimed at reducing excess capacity and improving profits. The company's Network of the Future plan involves closing 200 sortation centres over five years and increasing automation for handling packages.
However, the Transport and General Workers' Union (TGWU), which represents 340,000 UPS workers, has opposed the plan, calling it an "illegal violation of our national contract". The union argues that UPS is obligated to create 30,000 new full-time jobs under the current contract, which was ratified in August 2023.
The dispute highlights the challenges facing UPS, which is grappling with declining parcel volumes due to tariffs and a reduction in Amazon business. The company's efforts to optimise its network and reduce costs are expected to result in significant savings, with estimates suggesting that the elimination of 20,000 employees will lead to semi-variable cost reductions of over $1.2 billion.
The buyout offer is expected to be a key point of contention in negotiations between UPS and the TGWU, which has given the company until July 1 to provide data on the status of open positions and the delivery rate for vehicles equipped with air conditioning. The union has threatened to take action if the company does not comply with the hiring requirement and other commitments outlined in the contract.
Overall, the developments at UPS highlight the ongoing challenges facing the logistics industry, which is grappling with declining volumes and increasing competition. The company's efforts to optimise its network and reduce costs are likely to have a significant impact on its workforce and operations, and will be closely watched by investors and industry observers.
Sea:
- Over the last two weeks China/East Asia to North America West Coast spot rates have decreased by 39.4% from $5,592/FEU to $3,388/FEU according to Freightos data.
- China/East Asia to North America East Coast spot rates have fallen over the last two weeks, decreasing by 14.8% to $6,116/FEU.
- Global container spot prices have fallen over the last two weeks, and are now sitting at $2,893/FEU, a 19.7% decrease over the last two weeks and a 42.3% decrease from spot rates this time in 2024 according to the Freightos Baltic Index (FBX)
Air:
- Global Air Freight spot rates currently sit at $2.14, as rates continue to fluctuate according to the Freightos Air Freight Index (FAX)
- Europe to Northern America spot rates currently sit at $1.79 (100-3000kg), says FAX, decreasing by 1.1%
- Europe to Asia, Greater China spot rates currently sit at $1.17 (100-3000kg), says FAX, remaining unchanged.
That’s all for this week’s update…
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