About 1,100 employees will be offered a voluntary separation package as part of the work force reduction, which is meant to streamline the company’s U.S. small package segment. Other cuts will come through attrition and layoffs. The U.S. small package segment represents roughly 60 percent of UPS’ annual revenue. It handles shipments of up to 150 pounds by ground and air.
UPS, based in Atlanta, has 408,000 employees worldwide. About 340,000 of those workers are in the U.S.
UPS also raised its profit forecast for the fourth-quarter that ended in December, citing improving operations and cost cuts.
UPS will reduce its U.S. regions from five to three and its U.S. Districts from 46 to 20 in April. There are no plans to close any operating facilities. UPS said the consolidation of offices will not affect the sales and operations team, including drivers. UPS expects to incur a one-time charge in 2010 because of the restructuring.
Spokesman Norman Black said UPS now has the technology and management systems to oversee a much larger geographic area than before. So, it is consolidating district offices. Thanks to systems like package flow technology with real-time information on every package destined for a particular city, one management team can oversee the work in many cities. The same thing goes for UPS’ human resources systems and work force planning. More sophisticated computer operations allow UPS to more easily figure how many people it needs to sort packages in multiple locations, Black said.
UPS will change office staffing in its new, larger districts to strengthen marketing and sales efforts.
UPS also said it now expects to post earnings of 73 cents to 75 cents per share for the October to December quarter. UPS had previously predicted earnings of 58 to 65 cents per share. UPS will report fourth-quarter earnings on Feb. 2.
"The stronger earnings stem from better-than-expected results in both domestic and international operations and savings through cost management," Chief Financial Officer Kurt Kuehn said in a statement. "However, we still anticipate a gradual economic recovery with improvement more evident as 2010 progresses."
Standard & Poor’s upgraded UPS shares to a "buy" from a "hold," saying it thinks revenue trends will continue to improve through 2010. Deutsche Bank kept a "hold" rating on UPS shares.
UPS previously cut thousands of jobs and held down costs during the economic downturn. As of the end of the second quarter of 2009 it had shed 15,000 jobs, mostly through attrition, compared to the same time in 2008. In early 2009, UPS said it would freeze management salaries and suspend 401(k) matches for employees.
The company’s chief rival, FedEx, reported fiscal second-quarter earnings last month down 30 percent from a year earlier. FedEx, based in Memphis, Tenn., said the economy has "reached a turning point," but a full recovery could still be a long way off.
UPS spokesman Black said there is no specific competitive angle with FedEx in the plans announced Friday.
U.S. operations of both UPS and FedEx have been hurt as consumers and businesses shipped less and slowed remaining shipments to save money in the weak economy.
Shares of the world’s largest shipping carrier rose $2.76, or 4.8 percent, to close at $60.17 Friday after hitting a 52-week high of $61.13 earlier in the session.