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New operating structure will bring together FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation
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he company said the development will create even greater flexibility, efficiency, and intelligence to unlock value for customers, team members, and stockholders
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Company hosts DRIVE Investor Event to provide further detail on progress toward $4 billion in benefits from transformation
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FedEx also announced a 10% dividend increase
FedEx Corp. will consolidate its operating companies into one organization, ultimately bringing together FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation.
In a statement, FedEex said the phased transition, with full implementation expected in June 2024, will translate into a single company operating a unified, fully integrated air-ground network under the FedEx brand.
FedEx Freight will continue to provide less-than-truckload freight transportation services as a stand-alone company under Federal Express Corporation. Raj Subramaniam will serve as President and CEO of the combined organization.
“Over the last 50 years, we built networks that have created a differentiated and unmatched portfolio of services,” said Raj Subramaniam, president and CEO, FedEx Corporation. “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.”
The new structure will help facilitate the company’s DRIVE transformation, including Network 2.0, the multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada. In addition, the unified organization will bring distinct focus on the air network and international volume, as well as a more holistic approach to operations on the ground utilizing both FedEx employees and contracted service providers, the company said.
“We are building a simplified experience for our customers, who are at the center of everything we do, so they can adapt to the market,” continued Subramaniam. “This combination will allow us to provide customers with even greater value, offering the most advanced data-driven insights to help them make smarter decisions for their business.”
To aid in this smooth transition, effective April 16, 2023, John A. Smith 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 will serve as President and CEO, Airline and International at FedEx Express, overseeing all other regions and FedEx Logistics. During the transition period leading up to June 2024, there will be no change in financial reporting segments.
The DRIVE transformation spans 14 domains across four major areas: Customer, Surface Network, Air Network & International, and General and Administrative (G&A). FedEx expects DRIVE to generate $4.0 billion of permanent cost reductions in fiscal 2025.
Each area is expected to generate savings in fiscal 2025 as follows:
• $1.2 billion in Surface Network
• $1.3 billion in Air Network & International
• $1.5 billion in General & Administrative
DRIVE is also enabling the implementation of Network 2.0, which is expected to generate an incremental $2 billion of savings in fiscal 2027.
FedEx continues to project 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.
The FedEx Board of Directors approved an increase in the annual dividend rate on its common stock of 10%, or $0.44 per share, to $5.04 per share for fiscal 2024. The Board today declared a quarterly cash dividend of $1.26 per share of FedEx common stock. The dividend is payable July 3, 2023 to stockholders of record at the close of business on June 12, 2023.
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