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Is UPS dumping its Coyote Logistics?

is-ups-dumping-its-coyote-logistics

United Parcel Service (UPS), the world’s largest parcel delivery company, is considering a significant restructuring, which includes exploring strategic options for Coyote Logistics, its truckload, LTL and intermodal brokerage business. The move comes amid a challenging economic environment and a strategic shift within UPS to streamline operations and focus on more profitable segments.

Coyote Logistics, acquired by UPS in 2015 for $1.8 billion, was initially seen as a strategic addition to expand UPS’s service offerings. However, the cyclical nature of the freight brokerage industry has led to volatile revenue and profit margins for Coyote, prompting UPS to reassess this part of its business. The acquisition, which seemed promising during the height of the COVID-19 pandemic due to a surge in shipping demands, has since faced challenges as the market conditions changed, leading to multiple rounds of layoffs within Coyote since the start of 2023.

UPS’s decision to possibly divest Coyote Logistics is part of a broader initiative named “Fit to Serve,” aiming to reduce the company’s operational costs by $1 billion in 2024. This initiative will also result in the reduction of 12,000 full- and part-time management and contract jobs, representing less than 3% of the company’s total workforce. The majority of these layoffs are expected to occur in the first half of the year and will not affect unionized employees.

The strategic reevaluation of Coyote Logistics aligns with UPS’s previous decisions to divest from cyclical and less integrated business units. A notable example is the sale of UPS Freight, its less-than-truckload business, to Canadian firm TFI International Inc. for $800 million, three years prior.

Despite the current challenges, UPS anticipates a stabilization in revenue and margins through 2024, driven by expected improvements in labor costs and an uptick in U.S. and international demand. However, the company remains cautious, projecting a modest increase in revenue for 2024 and a decline in operating margins compared to the previous year.

The situation underscores the cyclical and often unpredictable nature of the logistics industry, where companies like UPS must continuously adapt to shifting market dynamics and align their business models with the evolving demands of the global economy​​​​.

According to a recent news article, Coyote Logistics had a revenue of over $4 billion during the COVID pandemic, which is roughly twice the company’s sales when it was acquired by UPS 1However, the revenue fell by more than $1 billion last year 1Another source states that Coyote Logistics’ peak revenue was $770 million in 2022 2.

UPS is currently exploring strategic alternatives for Coyote Logistics, including a potential sale