UPS Receives Judicial Consent for $150,000 Driver Severance Packages: Will This Reduce Expenses?

UPS Moves Ahead with $150,000 Driver Buyouts After Court Decision

United Parcel Service (UPS) is set to proceed with offering $150,000 buyout packages to selected drivers, following a federal judge’s decision to reject the International Brotherhood of Teamsters’ request to block the company’s workforce reduction plan. The union argued that these buyouts violated their current contract, but the court found insufficient evidence to support claims of harm.

Restructuring Plans and Strategic Shifts

As part of its ongoing efforts to streamline operations and cut costs, UPS revealed during its fourth-quarter 2025 earnings call that it intends to eliminate up to 30,000 operational roles and close several facilities by 2026. This restructuring is designed to decrease UPS’s dependence on Amazon.com deliveries and focus on more lucrative business segments.

Earlier in 2025, UPS management reached a preliminary agreement with Amazon to reduce shipment volumes by over half by June 2026. CEO Carol Tomé emphasized that Amazon is not among UPS’s most profitable clients, prompting the company to adjust its network to better align with this new volume outlook.

Union Response and Next Steps

UPS welcomed the court’s ruling, which followed a lawsuit from the union alleging a breach of the national contract. The company plans to provide drivers with further details about the buyout offers in the near future.

The decision to reduce the driver workforce comes after an 8.6% drop in package volumes last year—a trend UPS expects to continue as it shifts away from high-volume, low-margin Amazon shipments.

With the legal challenge resolved in UPS’s favor, attention now turns to how the union will respond. Investors are likely to monitor developments closely as the situation unfolds.

FedEx’s Cost-Cutting Initiatives

FedEx, a major competitor to UPS, is also implementing cost-saving strategies to address weak demand and enhance operational efficiency through its Network 2.0 program. In recent years, FedEx launched the DRIVE initiative, a comprehensive plan to boost long-term profitability.

DRIVE delivered $1.8 billion in permanent savings in fiscal 2024 and an additional $2.2 billion in fiscal 2025. These measures include reducing flight schedules, grounding aircraft, and lowering headcount. For fiscal 2026, FedEx aims to achieve $1 billion in transformation-related savings through DRIVE and Network 2.0.

UPS Stock Performance, Valuation, and Analyst Estimates

UPS shares have climbed more than 31% over the past six months, driven by its cost-reduction strategies. However, the stock has lagged behind the broader transportation and air freight industry during the same period.

6-Month Price Comparison

Source: Zacks Investment Research

From a valuation perspective, UPS currently trades below the industrial sector average based on its 12-month forward price-to-sales ratio.

Source: Zacks Investment Research

Analyst consensus estimates for UPS’s first and second quarters, as well as for full-year 2026 and 2027, have been revised downward over the past two months.

Source: Zacks Investment Research

Current Zacks Rank for UPS

UPS is presently rated as a Zacks Rank #3 (Hold).

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