Consolidation troubles are causing United Parcel Service Inc. to cut 1,200 jobs at its unprofitable UPS Supply Chain Solutions division.

According to Business First, in a conference call with analysts, company officials said UPS' Supply Chain and Freight segment, which includes UPS Supply Chain Solutions, UPS Freight and several other smaller subsidiaries, has experienced high overheard costs stemming from two large consolidations. The segment on Thursday reported a loss of $19 million for the third quarter, compared with net income of $70 million a year earlier.

UPS has had difficulties integrating Menlo Worldwide Forwarding, which it bought in 2004, into UPS Supply Chain Solutions, and Motor Cargo Inc., which it bought in August 2005, into UPS Freight. Both integrations have been completed, but they took longer and were more difficult than anticipated, leading to high overhead, officials said.

The UPS Freight division still managed to produce a profit for the third quarter, but UPS Supply Chain Solutions pushed the entire Supply Chain and Freight segment into a loss.

To cut costs, UPS will shed 1,200 jobs from UPS Supply Chain Solutions during the fourth quarter. The unit employs 32,000 workers worldwide.

UPS will take a fourth-quarter charge of $10 million to $20 million from severance costs, but the company expects the cuts to save $100 million in 2007. UPS expects the Supply Chain and Freight segment to break even in the fourth quarter and be profitable after that.

Norman Black, director of media relations for UPS, said the biggest number of cuts most likely will occur in UPS' headquarters in Atlanta, but he said there is no part of UPS Supply Chain Solutions that is off limits.

Black said he does not know how the job cuts will break down regionally, including how they will affect Louisville's UPS Supply Chain Solutions operations. The company employs about 2,000 supply chain workers at facilities located on Outer Loop, in Prospect, Jefferson Riverport International and Elizabethtown.

"I'm sure it will affect Louisville, but I have no idea what the exact number will be," he said, adding that the number of local cuts most likely will be small.

Despite the problems in the Supply Chain and Freight segment, UPS reported a 9 percent increase in overall net income for the third quarter, primarily credited to a 5 percent spike in global small-package volume.

Net income rose to $1.04 billion, or 96 cents per share, from $953 million, or 86 cents per share, a year ago. Revenue for the quarter rose to $11.7 billion from $10.6 billion. Daily U.S. ground volume increased 3.6 percent, while daily international package volume climbed 17 percent.

For the first nine months of 2006, the company's net income rose to $3.1 billion, or $2.82 a share, from $2.8 billion, or $2.52 a share, during the same period last year. Revenue increase to $30.1 billion from $26.2 billion.