UPS Inks Deal to Cap Driver Buyouts: Will the Cost Burden Ease?

United Parcel Service UPS inked a deal with the Teamsters National Negotiating Committee, placing limits on severance offers while safeguarding and prioritizing the seniority of Teamsters drivers.

Teamsters General President Sean M. O’Brien played a key role in compelling UPS to return to negotiations following the filing of national grievances against it. These grievances arose after UPS introduced its Driver Choice Program (“DCP”) in February without union consent. As a result, UPS was forced to withdraw the program in 13 states in March before eventually agreeing to negotiate.

Under the new settlement, UPS will face restrictions on the number of severance packages it can offer. Eligible drivers who choose early retirement will receive payments of $150,000. These offers will be extended to long-haul feeder drivers and Regular Package Car Drivers based on seniority across all regions. Additionally, UPS has committed not to introduce any other severance programs for the duration of the current Teamsters National Master Agreement, which remains in effect until July 31, 2028.

The agreement ensures that long-serving Teamsters drivers are given priority consideration for severance opportunities, while preserving union seniority and protecting members’ rights. It also prevents UPS from bypassing the union in future decisions without proper negotiation. The settlement further establishes a nationwide cap of 7,500 drivers eligible for severance payments across all job classifications.

The agreement highlights the longstanding contributions of Teamsters members to UPS’ success, recognizing their labor and dedication over decades. At the same time, this reinforces the union’s position that while supporting the company’s competitiveness, it will not accept violations of contractual obligations or infringements on workers’ rights.

As part of the restructuring and cost-cutting efforts, UPS announced on the fourth-quarter 2025 conference call that it would eliminate up to 30,000 operational jobs and close multiple facilities by 2026. This move aims to reduce reliance on Amazon. com AMZN deliveries and pivot toward more profitable business endeavors.

We remind investors that in 2025, UPS’ management reached an agreement in principle with Amazon to cut its shipment volume by more than 50% by June 2026. CEO Carol Tomé stated that Amazon was not UPS’ most profitable customer. The planned volume reduction is prompting UPS to adjust and right-size its network accordingly.

UPS’ competitor FedEx FDX is also implementing cost-cutting measures to address the soft demand environment and improve operations through its Network 2.0 initiative. A few years back, FedEx introduced DRIVE, a broad program aimed at enhancing long-term profitability.

DRIVE generated $1.8 billion in permanent savings in fiscal 2024 and delivered an additional $2.2 billion in cost savings in fiscal 2025. These efforts include lowering flight frequencies, parking aircraft and reducing headcount. For fiscal 2026, FedEx’s management expects to achieve more than $1 billion in transformation-related savings through initiatives such as DRIVE and Network 2.0.

UPS’ Price Performance, Valuation & Estimates

Despite its cost-cutting efforts, shares of UPS have declined in three months, underperforming the industry in the same timeframe.

3-Month Price Comparison

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From a valuation standpoint, UPS trades at a discount to industrial levels on the basis of the 12-month forward price-to-sales ratio.

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See how the Zacks Consensus Estimate for UPS’ earnings has been revised over the past 90 days.

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UPS’ Zacks Rank

UPS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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