The freight recession of 2023 has driven two more logistics giants to cut jobs.
Global container shipping titan A.P. Moller-Maersk is cutting its workforce by another 3,500 employees, with up to 2,500 of those in the coming months and the remaining 1,000 cuts extending into 2024. The cuts are part of a 10,000-employee layoff that started earlier this year to get headcount down to 100,000.
And in the U.S., railroad operator Union Pacific is eliminating “less than 5 percent” of its roughly 5,600 management jobs, which equates to about 280 positions. More than 100 of the affected employees have been offered opportunity to work on temporary projects at the employer of 33,000, and will be prioritized to backfill future open roles.
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The cuts at Maersk come as the shipping line announced third quarter earnings. Sales in the period plummeted 46.9 percent to $12.1 billion from $22.8 billion a year ago. However, net income fell 94.5 percent to $489 million, down from the $8.8 billion generated in the year-ago period when ocean carriers were making record profits amid tight capacity and astronomical freight rates.
“Our industry is facing a new normal with subdued demand, prices back in line with historical levels and inflationary pressure on our cost base,” said Vincent Clerc, CEO of Maersk, in a statement, noting that overcapacity in most regions had driven down prices. “Given the challenging times ahead, we accelerated several cost and cash containment measures to safeguard our financial performance.”
The job cuts for Maersk will incur a restructuring charge of $350 million, up from the $150 million expected back in February. But in the long run, Maersk expects total cost savings from the reorganization to be around $600 million next year.
Maersk’s earnings project global container volume performance in the range of a 2 percent to 0.5 percent decline, compared to previous range of down 4 percent to 1 percent. It expects ocean freight to grow in line with the market.
At Union Pacific, new CEO Jim Vena is seeking to trim the fat to “reduce layers, increase spans of control and restructure teams and processes to better empower employees to make decisions.” In a statement, Vena indicated that senior executives identified 23 strategic projects spanning nine departments where the temporarily retained employees will work.
An undisclosed number of employees were offered different jobs at different levels and other locations, while other employees were given the option to stay on at Union Pacific as a craft professional.
Vena made streamlining the organization one of his first priorities after taking the job in August.
“You can’t have nine levels from the CEO to the people who actually do the work and expect that the message is clear, the decisions are made clear and there isn’t some hiccup in the decision,” Vena said in an October earnings call. “And I want to drive it so that we have way less layers. And that means with less layers, the people out in the field are empowered to make the right decision.”
The layoffs at Maersk and Union Pacific are the latest in a line of logistics companies cutting staff. The bankruptcy and liquidation of trucking giant Yellow Corp. resulted in the loss of 30,000 jobs, while trucking marketplace Convoy shrunk headcount from approximately 1,500 last year to roughly 500 before ceasing operations and selling its technology to Flexport.
Flexport had two sets of layoffs this year that eliminated roughly 1,200 positions, while logistics giants like Amazon, UPS, FedEx, DHL, U.S. Xpress and GXO have all cut jobs. Freight tech firms like Freightos, Project44 and Flexe had substantial reductions in recent months to cut spending.
The issues plaguing the logistics ecosystem may soon be compounded by another problem, according to Lior Ron, CEO of Uber Freight, the ride sharing giant’s freight brokerage. Ron told CNBC that the freight recession may be at a new “tipping point” due to increasing fuel costs.
“Low fuel prices earlier this year likely helped many carriers manage through low rates, but increasing fuel costs may be a tipping point for carriers operating with little to no margin,” Ron said.
Uber Freight, which had two rounds of layoffs earlier this year that impacted 100 jobs, is seeing more carriers giving back lanes after bids, according to Ron. This could be an indicator that carriers are unable to afford to run certain shipping routes, he said.
The World Bank warned in a report on Tuesday that oil prices could reach record highs if the Israel-Hamas war spreads beyond the Gaza Strip.
