FedEx Corp. announces broad subsidiary consolidation

April 5, 2023

Land Line Staff

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FedEx Corp. is embarking on consolidation of most of its operating companies over the coming year.

Consolidating the operating companies into one organization is expected to create efficiencies and ultimately build a stronger, more profitable enterprise, according to a company statement.

This phased transition, with full implementation expected in June 2024, will ultimately bring FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corp. They are expected to become a single company operating a unified, fully integrated air-ground network under the FedEx brand.

Raj Subramaniam will be president and CEO of the combined organization. He became president and CEO of FedEx Corp. in March 2022.

FedEx Freight, the corporation’s less-than-truckload freight transportation services operation, will continue to operate as a stand-alone company under Federal Express Corp.

“Over the last 50 years, we built networks that have created a differentiated and unmatched portfolio of services,” Subramaniam said in the company statement. “This organizational evolution reflects how we represent ourselves in the marketplace – focused on flexibility, efficiency and intelligence. As one FedEx team, we are well positioned to execute on our mission to help customers compete and win with the world’s smartest logistics network.”

During the transition period leading up to June 2024, there will be no change in financial reporting segments, the company announced.

The company’s planned transformation, which it calls DRIVE, spans 14 domains across four major areas: customer, surface network, air network and international, and general and administrative. FedEx Corp. expects DRIVE to generate $4 billion in permanent cost reductions in fiscal 2025.

The transformation also is enabling the implementation of Network 2.0, which is expected to generate an incremental $2 billion of savings in fiscal 2027. Network 2.0 is meant to promote collaboration between its shipping segments, FedEx Express, FedEx Ground and FedEx Freight by using cloud computer systems. It was announced last summer.

FedEx Corp. projects costs of up to $2 billion by the end of fiscal 2025 to implement its business optimization initiatives, including the DRIVE and Network 2.0 programs.

In February, FedEx announced it was cutting 10% of its officers and directors and had been reducing staff since June 2022. Reuters reported investors applauded the move.

FedEx Corp. was founded in 1971 by Frederick W. Smith in Little Rock, Ark. Headquarters were moved in 1973 to Memphis, Tenn.

Frederick Smith stepped down as CEO in 2022 and became executive chairman of the board.

Effective April 16, 2023, John A. Smith (not related to FedEx’s founder) will become president and CEO of U.S. and Canada ground operations at FedEx Express and assume leadership of surface operations across the FedEx Express, FedEx Ground, and FedEx Freight businesses.

Richard W. Smith, son of the founder, became president of FedEx Express last April, reports CommercialAppeal.com, and assumed full responsibilities in September 2022. Under the new organization, he will be president and CEO of airline and international at FedEx Express, overseeing all other regions and FedEx Logistics.

The FedEx Board of Directors approved an increase in the annual dividend rate on its common stock of 10%, or 44 cents per share, to $5.04 per share for fiscal 2024. The board declared a quarterly cash dividend of $1.26 per share of FedEx common stock. LL

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