UPS said Tuesday it would make "some bold moves" to shore up revenues and stabilize its business after closing the books on a rough 2023, and one of those maneuvers is likely to be shedding its truckload brokerage business Coyote Logistics.
"Coyote is part of [UPS's] Supply Chain Solution [business] and is a business that is highly cyclical with considerable earnings volatility," said Carol Tome, UPS Chief Executive Officer, citing a need to "explore strategic alternatives" for Coyote.
Tome was a member of the UPS Board of Directors when UPS acquired Coyote in 2015, "but the strategic rationale was really about expanding the portfolio," she said. "And it was a very thoughtful strategic rationale to expand the portfolio. But I don't think we fully understood at the time just how cyclical this business is."
UPS Chief Financial Officer Brian Newman added that Coyote continues to face pressure from excess capacity in the market, which drove revenue and operating profit down, adding a potential exit of brokerage segment "will enable us to address some of the cyclical impacts in our forwarding business."
Tome noted that the UPS Supply Chain Solutions business was down $3 billion year-over-year, which is one-third of the overall company decline. "Within that $3 billion, Coyote made up 38% of the decline for the year and 48% of the decline for the fourth quarter," she said.
Tome said UPS would seek to offer similar "very low margin" services that Coyote provides without the expensive overhead.
Coming out of a "difficult and disappointing" 2023, UPS also expects a workforce reduction of approximately 12,000 positions as part of its effort to trim $1 billion in cost this year.
Among the headwinds UPS is facing are a stagnant home delivery market and a historic deal with the Teamsters union.
