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FedEx Merges Delivery Units in $4 Billion Cost-Cutting Strategy

FedEx Corp announced plans to consolidate its separate delivery companies into one entity to reduce costs and enhance competition with United Parcel Service (UPS) and Amazon.

FedEx cargo planes
FedEx cargo planes

Integration of FedEx Ground and FedEx Express

The integration of FedEx Ground, the outsourced package delivery arm, with the FedEx Express overnight air delivery business comes after activist investor D.E. Shaw pushed for change and secured two additional board seats.

CEO Subramaniam Responds to Market Pressures

With the e-commerce delivery bubble deflating and potential recession looming, CEO Raj Subramaniam has been pressured to streamline FedEx's operations.

Anticipated Benefits of Reorganization

Subramaniam believes the reorganization will result in a leaner, more agile company better positioned to execute its mission to provide customers with the world's smartest logistics network.

Timeline and Cost-Cutting Goals

The combined business is set to handle all deliveries starting June 2024 as part of a broader plan by the Memphis-based group to cut $4 billion in permanent costs by the end of its 2025 financial year.

Leadership Changes and Ongoing Operations

John Smith will become president and CEO of U.S. and Canada ground operations at FedEx Express, while FedEx Freight will continue to provide freight transportation services as a standalone company.

FedEx Adopts Hybrid Employee Model

According to CEO Subramaniam, FedEx plans to utilize a "hybrid" employee and contractor model for deliveries and will remain non-union.

Project Timeline and Activist Influence

Although FedEx has been exploring this project for several years, analysts noted the company's "standstill" agreement with activist D.E. Shaw was set to expire at the end of May, potentially influencing the announcement's timing.

Industry Experts Weigh In

Satish Jindel, a founder of the company that eventually became FedEx Ground, believes the integration is achievable and will boost profit and shares. Critics, however, point to the