FedEx targets $4b cost cuts by merging delivery networks

FedEx Corp. is seeking to cut $4b in costs by combining its two main delivery networks, in an ambitious plan by new CEO Raj Subramaniam to increase profit margins. The courier 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 2024, it will be “a single company operating a unified, fully integrated air-ground network under the respected FedEx brand,” the company said Wednesday. “FedEx is at a pivotal moment in history,” Subramaniam said during an investor meeting in New York. “There is significant value in FedEx that’s being unlocked for shareholders.” The courier’s shares rose 3.8% at 9:49 a.m. 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 unionized workforce and pays its drivers more than twice what their counterparts at FedEx’s ground network make. Many analysts point to the efficiencies of UPS’s single delivery network as the reason. In the latest quarter, UPS reported adjusted operating margins of 13% compared with just 5.2% for FedEx. <br/>