Following the reduction of its logistics delivery business with Amazon, United Parcel Service Inc has achieved approximately $3.5 billion in cost savings through streamlined operations. However, the company's Chief Financial Officer stated that significant work remains to enhance the profitability of its package delivery operations. "Similar to any large-scale restructuring, the final third of the work is considerably more challenging than the first half," said CFO Brian Dykes. "We need to meticulously plan the phased consolidation of distribution centers and determine the timing and specific plans for workforce reductions." As a former largest client, Amazon has cut its logistics order volume, prompting this delivery giant to actively adjust its business scale to adapt to the new market landscape. The company announced this week that it plans to cut an additional 30,000 operational jobs this year, on top of the 48,000 already eliminated in 2025. In 2025, UPS closed over 90 distribution centers and expects to shutter at least 24 more in the first half of this year. "The reality is, with reduced order volume, we need to scale back the corresponding job allocations," Dykes pointed out. "Whether it's package sorters or delivery drivers, both working hours and the number of positions will be adjusted accordingly." Since announcing a significant plan in January 2025 to reduce its reliance on Amazon's delivery business, United Parcel Service Inc has faced a series of severe challenges. Last year, the company not only had to contend with tariff impacts from the trade war, the elimination of the de minimis exemption policy, and higher-than-expected delivery costs for its 'Ground Saver' service, but it also worked to help customers navigate various operational difficulties. UPS stated that the decision to scale back Amazon's freight volume was driven by the business's high throughput failing to generate sufficient profit, instead dragging down the company's overall profit margin. "Last year was a difficult one," Dykes said. "Many situations differed substantially from our initial expectations." "We view this period of global trade turbulence as an opportunity," he added. Dykes stated that UPS plans to eliminate the majority of the 30,000 positions in 2026 through voluntary departures, with the remaining roles being addressed via a voluntary buyout program offered to full-time drivers. UPS indicated that its global full-time workforce totals approximately 490,000 employees. These ongoing job cuts stem from a five-year labor agreement UPS reached in 2023 with the International Brotherhood of Teamsters. The contract stipulates that full-time drivers will receive an average annual salary and benefits package totaling $170,000. Since the contract's approval, the company's stock price has fallen by 36% as of last Friday, reflecting the difficulties UPS faces in responding to multiple challenges. David Vernon, a senior analyst at Bernstein Research, stated that because UPS is further reducing Amazon freight volume while also needing to replace its MD-11 fleet following a cargo plane crash last November, the company will temporarily struggle to cut costs from its operations in the first half of this year. Simultaneously, the company is still dealing with the aftermath of shifting trade patterns and the termination of the 'de minimis' policy. However, he indicated that this difficult period is nearing its end. "They still need to get through the first half of this year, which is going to be extremely tough," Vernon said. Dykes stated that during the company's restructuring, its investments have not halted but have instead focused on expanding capabilities in the healthcare sector and growing its international footprint in regions like Hong Kong and the Philippines. During this period, the company spent approximately $2 billion on acquisitions, including the purchase of Canada's Andlauer Healthcare Group for about $1.6 billion. UPS plans to allocate around $3 billion in capital expenditures this year, a decrease from its nearly $3.5 billion in spending during 2025. Analysts said that financial reports indicate the company's strategic layout is beginning to show results. UPS reported a quarterly profit of $1.79 billion for the period ending in December, an increase from the $1.72 billion reported in the same quarter a year earlier. "As the impact of scaling back the Amazon business diminishes, you will begin to see the growth effects from these investments," Dykes stated. Jason Seidl, a senior transportation analyst at TD Cowen, noted, "UPS's maintenance capital expenditures will help generate more free cash flow to support its dividend payments in 2026. In the past, the company had to borrow to cover the shortfall for dividend payments." Seidl added, "Going forward, it appears they will be able to avoid this scenario, which is positive news."
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