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FedEx Corp is seeking to cut $4 billion in costs by combining its two main delivery networks, in an ambitious plan by new Chief Executive Officer (CEO) Raj Subramaniam to increase profit margins.
The company has for decades operated an express package business separately from its ground unit, which FedEx acquired in 1998 and depends on third-party contractors to make the last-mile delivery of parcels. As of June of 2024, it will be “a single company operating a unified, fully integrated air-ground network under the respected FedEx brand,†FedEx said in a statement.
The courier’s shares rose 2.4% before regular trading in New York. The stock has been trading almost 30% below its May 2021 peak.
FedEx has trailed United Parcel Service Inc on profit margins even though its larger rival has a unionised workforce and pays its drivers more than twice what drivers at FedEx’s ground network make. Many analysts point to the efficiencies of UPS’s single delivery network as the reason.
The company didn’t give details in the statement on any job cuts and a spokesperson offered no specifics on the scope or timeline.
“We will continue to focus on responsible headcount management in our operations as well as corporate functions,†spokesperson Rachael Simmons said in an email.
FedEx is trying to regain its footing after Subramaniam was forced to scrap profit growth goals outlined due to declining package volumes.