FedEx Corp (FDX.N) announced on Wednesday that it would trim its officer & director ranks by even more than 10% as part of a major cost-cutting initiative that has seen the transportation behemoth lay off 12,000 employees since June.
Investors cheered the action, which shows progress on the business’s objective to reduce spending by $3.7 billion in 2023. FedEx shares increased 3.4% to $200.52 as a result.
In a memo, FedEx informed staff members of the senior-level layoffs but did not specify the number of affected positions.
A little more than 2% of FedEx’s 547,000 comprehensive and part-time employees recorded for the year concluded May 2022 are accounted for by the company’s total personnel reductions.
Regrettably, Chief Executive Raj Subramaniam commented that this was a necessary measure to develop a more efficient, agile business, adding that FedEx is consolidating several teams and operations.
Spokeswoman Rachael Simmons said the majority of the cuts were made through turnover and other personnel management initiatives.
Midway through September, FedEx lowered their profit prediction, causing a 20%+ decline in the company’s stock, the biggest one-day decline in its 50-year history.
The company’s newly appointed CEO, Subramaniam, laid the blame on the global economic slump, while detractors cited a lack of responsiveness to waning demand and continuous financial pressure from FedEx’s pricey, independently managed business units.
Job losses would be welcomed, according to Gary Bradshaw, the portfolio manager at Hodges Capital Management in Dallas, who recently spoke on the topic.
This is especially true after FedEx dropped its annual profit forecast.
They have a lot of right-sizing to accomplish, according to Bradshaw.
Due to its reliance on less expensive non-union and outsourced labour, FedEx had investor preference over United Parcel Service’s (UPS.N), an unionised competition, for many years.
However, in recent years, Carol Tomé, CEO of UPS, has increased earnings and improved services through the organization’s unified network.
Using the workforce figures from the most current annual reports for each firm, FedEx will have cut the amount of its full- and part-time workers to about 535,000, putting it about on pace with UPS.
The majority of FedEx Ground’s house delivery business is handled by approximately 6,000 FedEx contractors and their employees, so those figures only tell part of the story.
Consultant Satish Jindel, who assisted in the establishment of the business that became FedEx Ground, said the majority of Ground contractors had between nine and twelve people. With 10.5 employees on average per contractor, Ground would bring 69,000 new jobs.
As the pandemic-blown e-commerce delivery balloon deflates and a recession looms, FedEx has already temporarily furloughed employees at FedEx Freight, joining other transportation-focused businesses like delivery upstart Amazon.com (AMZN.O), the trucking company and all-rounder C.H. Robinson Worldwide (CHRW.O), transportation broker Uber Freight, and freight transmitting startup Flexport in announcing layoffs.
On the other hand, Intel Corp (INTC.O) announced on Tuesday that it has made significant reductions to CEO and employee pay, a week after the company gave a lower-than-anticipated sales projection due to a decline in the PC market and a loss of market share to rivals.
According to a person with knowledge of the situation who was not permitted to speak publicly, the pay cuts will not affect the company’s hourly labour but will instead range from 5% of the basic salary for mid-level personnel to as much as 25% to Chief Executive Pat Gelsinger.
The adjustments are intended to have a greater impact on our executive population and will promote the investments and broader workforce, according to a statement from Intel spokesperson Addy Burr.
Following several years of expansion during the pandemic, Intel reported last week that its profit margins were declining as the PC market slowed.
Additionally, Gelsinger acknowledged that Intel had “stumbled” and had lost market share to competitors like Advanced Micro Devices Inc (AMD.O), that on Tuesday posted quarterly sales that exceeded Wall Street’s projections.