Saturday, October 13, 2012

Major US Freight and Logistics Group Prophesy Increased Profits but Less Jobs

Plans Apparently Relying Largely on Staff Position Buyouts
Shipping News Feature

US – Earlier this week, international logistics corporation FedEx announced programmes targeting an annual profitability improvement of $1.7 billion during the next three years, with a significant portion of the benefits, as much as 75%, achieved by 2015. The bulk of this extra money is apparently to come from improved figures at FedEx Express which has lagged behind FedEx Ground and FedEx Freight of late. The worrying note for the labour force will be that there appears to be no plain speaking as yet relating to jobs in the speech to FedEx Corporation’s 2012 Investors and Lenders Meeting by Frederick W. Smith, FedEx chairman, president and chief executive officer who said:

“We intend to increase our dividends in years to come. A significant portion of the profitability improvement will come from cost reductions at FedEx Express and FedEx Services. The profit improvement initiatives, along with the combined strength of FedEx Ground and FedEx Freight, would put FedEx on track to achieving its financial goals. We are confident we will deliver the performance to ensure the near- and long-term success of FedEx, and, we believe we can do this even in low-growth environments for global trade and within the major economies."

The tactic is clearly aimed at supporting the stock price of FedEx and has received general approval from financial analysts in the US but Mr Smith’s comments regarding the methods to be used to achieve the enormous leap in profitability appear somewhat veiled. He talks about ‘fiscal buyouts’, the voluntary redundancies the company announced in August, yet says there will be no exact figures regarding these until the latter half of next year thus pacifying investors but worrying over 100,000 US employees, many of whom have a hard decision to make and no doubt some who will have the decision made for them. FedEx Express president and CEO David J. Bronczek mentions $750 million in savings from ‘consolidations and improved staff efficiency functions and processes’, all talk that will particularly concern any subcontractors many of whom will have contracts which FedEx can presumably end within the next year at no cost to the company.

FedEx reaffirmed its outlook for fiscal 2013 of $6.20 to $6.60 per diluted share, and second quarter earnings of $1.30 to $1.45 per diluted share, these ‘guidance figures’ assume the current outlook for fuel prices and do not include any costs or benefits related to the planned voluntary buyout programme. At the annual investors meeting in Memphis Mr Bronczek told the gathering the company would get back to delivering the kind of results expected from the FedEx Express with the strategy to raise operating profits back up around 10% from the 7.5% seen recently.