US FedEx chief warns on EU over-regulation
Rigid labour markets and excessive red tape are deterring US investment in Europe and pose a "huge danger" to the continent's economy, Fred Smith, chief executive of FedEx, has warned.
Restrictive regulations and heavy social obligations on employers made US companies, including FedEx, cautious about expanding across the Atlantic. "Most US CEOs are particularly worried about the continued proliferation of regulations that come out of the EU," Mr Smith told the FT.
While it is uncommon for such views to be voiced publicly, they are shared by many US chief executives who are increasingly in favour of higher-growth opportunities in Asia and the US.
Historically, corporate America has invested far more money in Europe than any other region. But scepticism about the pace of economic reform, particularly in the wake of the German election and French referendum on the EU constitution, poses significant risks.
US multinationals also complain of the difficulties of operating in multiple jurisdictions and the restrictions that labour laws place on their ability to restructure existing operations.
Mr Smith said the slow pace of economic growth in Europe was directly related to the "difficult regulatory environment" and this "weighed heavily" on FedEx's European ambitions. FedEx, the world's second-largest package delivery group, has a strong presence in Europe's international express delivery sector but has remained largely absent from domestic markets.
Although some analysts have suggested that FedEx might seek a bigger European foothold by bidding for TNT, the Dutch post and parcel group, Mr Smith said he saw no urgent need for a European acquisition. "We would not be afraid to invest Dollars 5bn-Dollars 6bn (in an acquisition)," he said. "But we are not going to make any investments of that magnitude unless there were wonderful financial returns."
FedEx was unlikely to follow the example of its German rival Deutsche Post by expanding aggressively into logistics and freight forwarding services.
The US group has been seen as a possible counter-bidder for Exel, the UK logistics groups that agreed last month to a Pounds 3.7bn (Dollars 6.5bn) merger with Deutsche Post. However, Mr Smith said FedEx would remain focused on its core parcel delivery and light freight businesses.
"We have looked long and hard at whether we want to be a big player in the contract logistics sector," he said. "We have chosen not to do so because it is a low margin business and it is not clear to us that there is the type of synergies there our competitors hope to find."
Deutsche Post, which owns the DHL parcel network, has made a series of large acquisitions in the logistics and freight-forwarding sectors as it prepares to lose its monopoly of the German postal market in 2007.
FedEx CEO: Red tape threatening Europe economy
JOURNAL OF COMMERCE, Web, Sec. ECOMM, p WP 10-20-2005
Rigid labor markets and excessive red tape are deterring U.S. investment in Europe and pose a "huge danger" to the continent's economy, Fred Smith, chief executive of FedEx, warned. "Most U.S. CEOs are particularly worried about the continued proliferation of regulations that come out of the EU," Smith said in an interview with the Financial Times of London. Smith said the slow pace of economic growth in Europe was "directly related" to the "difficult regulatory environment" and this "weighed heavily" on FedEx's European ambitions. FedEx, the world's second-largest package delivery group, maintains a strong position in Europe's international express markets, but has not developed its domestic business as much. Although some analysts have suggested that FedEx might seek a bigger European foothold by bidding for Dutch logistics provider TNT, Smith said he saw no urgent need for a European acquisition. "We would not be afraid to invest" $5 billion to $6 billion in an acquisition, he said. "But we are not going to make any investments of that magnitude unless there were wonderful financial returns." Smith said FedEx has no plans to counter-bid for Exel, the leading British logistics company that has agreed to a $6.5 billion merger with Germany's Deutsche Post. "We have looked long and hard at whether we want to be a big player in the contract logistics sector," he said. "We have chosen not to do so because it is a low-margin business and it is not clear to us that there is the type of synergies there that our competitors hope to find."
