UPS ditched Amazon to be more profitable. Now it’s slashing 20,000 jobs and plans to close over 70 facilities

• UPS global mail Cut 20,000 jobs and automation of hundreds of facilities while trying to strengthen profitability in the middle of a massive overhaul of its delivery network. Earlier this year, the company announced an ambitious plan to decline Amazon in favor of more profitable packages – just before Trump's pricing announcements send global commercial volumes.

United Bloi Service made waves earlier this year when she announced a break with the largest electronic commerce in the world. Amazon, a competitor as well as a client making more than one tenth of UPS revenues, had become not profitable for the sender, and in January of this year, UPS announced its intention to reduce the volume it delivered for Amazon by 50% in about a year and a half.

“They are our greatest client, but it is not our most profitable client,” said Carol Tomé, CEO of UPS, in an interview with Bloomberg televisionDescribing movement as “taking control of our destiny”.

Three months later, this destiny became clearer because UPS announces its intention to reduce 20,000 jobs, close 73 installations and reorganize its shipping network to use less human labor – reduce them that the sender declared “online” with the Amazon volume he lost, but also set up to be more profitable in the future.

“We execute the largest reconfiguration of the network in our history,” said Tome on the company gains Call on Tuesday after announcing the changes.

Amazon UPS deliveries are “are not profitable for us, nor a healthy adjustment for our network,” she said. In addition, UPS plans to increase automation, she said, which “will reduce our dependence on work [and] Reduce the capital requirements necessary to execute the network. »»

About half of the buildings to be closed are found in the east of the United States, said financial director Brian Dykes. The reduction of 20,000 jobs will be “carried out throughout the American network”.

The thrust of the modernization of UPS, of which parts have been announced above, implies the consolidation and closure of 200 sorting installations over five years. As part of the plan, nicknamed “Network of the Future”, the sender automated the sorting of packages; He also plans to use robotics for tasks such as loading and unloading of trailers and labels' application, Tome to investors told.

In the end, some 400 installations of the UPS network will be partially or fully automated, said Nando Cesarone, president of us, to investors. “The end result will be a much more effective operation with less dependence on work,” he said.

It is a new importance for the Union teamsters, which represents around 350,000 UPS workers, and which has also negotiated a historical contract For his workforce two years ago.

“If UPS wants to continue to reduce business management, teamsters do not support its way,” said team president Sean O'Brien statement. “But if the company intends to violate our contract or try to pursue jobs of teams that argue hard and well paid, UPS will be in a hell of a fight.”

Upcoming shipping uncertainty

Amazon UPS decoupling can however be the easy part of its reconfiguration. A few weeks after announcing this change, President Donald Trump announced prices on American trade partners, effectively increasing consumer prices on thousands of goods and launching the nation in a series of renegotiations with high issues with dozens of nations. Currently, importers pay a reference rate of 10% on all imports and 145% on most imports from China, while varying the rates of “reciprocal prices” over almost 60 years country are ready to kick this summer.

This upheaval meant less shipping for UPS in February and March, and led the sender to advice on Yank's results for the rest of the year.

“The world has not been faced with such enormous potential impacts to exchange for more than 100 years,” said Tomé. “The only thing we are certain of is that we do not know who, if necessary, of our scenarios will take place.”

About only 2% of the volume of UPS comes from international packages, the leaders said. However, the UPS China-Ups trade lines are the most profitable in the company, investors told Tomé. But as this road dry, the company sees demand increase from the expeditions of China to the rest of the world, as well as from Europe, Thailand and Vietnam.

The company expects a 9% drop in American shipments in the second quarter and a modest drop in income.

“There is so much uncertainty in China, now it has been announced,” said Tomé. “We do not actually know what will happen. We don't know if it's okay. There are a lot of things we don't know. ”

This story was initially presented on Fortune.com