More than 10 per cent of FedEx Express and FedEx Services US senior executives have accepted ‘buyout’ offers to leave the business, with ‘rank-and-file’ employees expected to learn from today
whether they are eligible to apply for the voluntary redundancy scheme, which is part of the group’s restructuring programme to cut spending and boost profits by US$1.7 billion over three years.FedEx Express and FedEx Services last week began communicating details internally of “a neworganisational structure that will be implemented over the next several months”, including a “variety of personnel changes at the Officer and Director level”.
A spokesman told CEP-Research: “These changes are just one component of our previouslyannounced plan to improve FedEx profitability by $1.7 billion by the end of fiscal year2016. As part of the changes announced internally across FedEx Express and Services, we willreduce our total number of US-based Officers and Directors by more than 10 per cent. Thisreflects Officers and Directors accepting the previously announced Voluntary Buyout Program.” It isnot known how many US-based senior staff the company has.
In making these changes, he said the company’s goals included: streamlining processes toreduce cost and gain efficiencies; combining similar functions to allow the company to operateeffectively with fewer positions; and prioritising vital activities and eliminating or deferringless-critical activities. He said: “Anticipated cost savings from these changes are included in thepreviously announced $1.7 billion profitability improvement plan expected to be realised by the endof fiscal 2016.”
Several US media reports claimed that ‘rank-and-file’ employees would learn today whetherthey are also eligible to apply for the voluntary redundancy scheme, although a FedEx spokesmantoday told CEP-Research that employees would learn their eligibility “over the next few days”.
It remains unclear how many voluntary job losses will result from the programme, althoughwhen the company announced the planned voluntary buyout programme last October, it said it expecteda headcount reduction of several thousand.
Alongside “operational efficiencies”, this part of the programme is aiming to achieve $400million in profit improvements, with a further $300 million improvement targeted through theon-going air fleet modernisation, with more fuel-efficient B767 and B757s replacing older planesand thus reducing operating costs.
In addition, FedEx Express wants to achieve a further $350 million cost saving from improvingits US domestic performance, with fewer flying hours and more-modern vehicles, and a further $150million from growth and yield management measures. In the international business, FedEx Expressalso aims to achieve a $350 million improvement through a mix of cost reductions and revenuegrowth.
Fred Smith, FedEx chairman, president and CEO, told investors and analysts last October thatthe US domestic express market was no longer growing and that FedEx had been forced to change itsexpress strategy in response to the financial crisis and slower international economic growth. Theplan was “to revamp the Express cost structure through a combination of cost reductions, efficiencyimprovements, and service repositioning”, Smith said.
He said the planned $1.7 billion profit improvement would mainly be achieved by cutting costsat FedEx Express and FedEx Services, with three-quarter of the benefits intended to be achieved byfiscal 2015. Smith said FedEx Express would focus on the international express business in futurewhile the freight forwarding business FedEx Trade Networks would be further expanded.
He noted that the international air express market was growing as a proportion of the overallair and ocean freight market, reaching $32 billion, or 11 per cent of the overall market, by 2011.In comparison, air freight was worth $46.3 billion, or 15 per cent of the market, down from 20 percent in 2004, while ocean freight had grown to $225 billion, or 74 per cent of the market.
