FedEx suspends employee profit sharing

Employees are finding out exactly what "stringent cost controls" really means at Memphis-based FedEx Corp. as the economy continues to deteriorate its core overnight air express business.

For instance, approximately 150,000 employees, including management, of FedEx Corp., the holding company, and its FedEx Express and FedEx Services units have had their profit sharing benefits suspended indefinitely. Profit sharing will not be paid out for the second half of fiscal 2001 as well as for the entire fiscal 2002 unless the company's business improves significantly, confirmed Shirlee Clark, FedEx spokesman, Monday.

In fact, most of the incentive plans at those companies have been suspended or curtailed indefinitely, Clark said.

The last time profit sharing was suspended was in 1988, she said. Clark did not say how much FedEx expects to save as a result.

In recent weeks, Clark said, the management at each of FedEx's five operating units and FedEx Services, the sales-marketing-information technology arm, has communicated to employees where the cost control reductions are happening and why.

In April, the U.S. domestic average daily volume at FedEx Express, the overnight delivery carrier and its largest unit, declined 9 percent year-over-year, continuing a year-over-year slump in that business as the demand for high-tech and high-value and durable goods shrinks.

FedEx expects that softness to continue into its next fiscal year as well. And so, despite the reduction in expenses and capital spending that have taken place so far, FedEx is forced to make even deeper cuts.

FedEx is also suspending training, travel and meetings that can be viewed as discretionary. Hiring freezes are in effect as well, except in areas critical to the company's operation. To that end, aircraft maintenance and sales and marketing areas could be considered critical.

Clark said the $7.2 billion U.S. Postal Service contract, which begins this fall, has not been impacted. Under the air transport portion of the deal, FedEx will transport express and priority mail for the Postal Service.

Analysts said FedEx's recent actions show how much the slowing economy continues to dog its business. It also shows the extent to which FedEx is trying not to follow other companies that have had large-scale layoffs, analysts said.

In that light, FedEx suspending benefits, like profit sharing, is akin to companies trying to reduce the rising costs of medical plans because they are costs that can be controlled, according to employee benefit experts.

Clark said, "I think that our employees understand that we have taken these actions in order to help our profitability and protect jobs." Throughout FedEx's history, Clark said employees have been known to make sacrifices.

– Richard Thompson: 529-2346
Employees are finding out exactly what "stringent cost controls" really means at Memphis-based FedEx Corp. as the economy continues to deteriorate its core overnight air express business.

For instance, approximately 150,000 employees, including management, of FedEx Corp., the holding company, and its FedEx Express and FedEx Services units have had their profit sharing benefits suspended indefinitely. Profit sharing will not be paid out for the second half of fiscal 2001 as well as for the entire fiscal 2002 unless the company's business improves significantly, confirmed Shirlee Clark, FedEx spokesman, Monday.

In fact, most of the incentive plans at those companies have been suspended or curtailed indefinitely, Clark said.

The last time profit sharing was suspended was in 1988, she said. Clark did not say how much FedEx expects to save as a result.

In recent weeks, Clark said, the management at each of FedEx's five operating units and FedEx Services, the sales-marketing-information technology arm, has communicated to employees where the cost control reductions are happening and why.

In April, the U.S. domestic average daily volume at FedEx Express, the overnight delivery carrier and its largest unit, declined 9 percent year-over-year, continuing a year-over-year slump in that business as the demand for high-tech and high-value and durable goods shrinks.

FedEx expects that softness to continue into its next fiscal year as well. And so, despite the reduction in expenses and capital spending that have taken place so far, FedEx is forced to make even deeper cuts.

FedEx is also suspending training, travel and meetings that can be viewed as discretionary. Hiring freezes are in effect as well, except in areas critical to the company's operation. To that end, aircraft maintenance and sales and marketing areas could be considered critical.

Clark said the $7.2 billion U.S. Postal Service contract, which begins this fall, has not been impacted. Under the air transport portion of the deal, FedEx will transport express and priority mail for the Postal Service.

Analysts said FedEx's recent actions show how much the slowing economy continues to dog its business. It also shows the extent to which FedEx is trying not to follow other companies that have had large-scale layoffs, analysts said.

In that light, FedEx suspending benefits, like profit sharing, is akin to companies trying to reduce the rising costs of medical plans because they are costs that can be controlled, according to employee benefit experts.

Clark said, "I think that our employees understand that we have taken these actions in order to help our profitability and protect jobs." Throughout FedEx's history, Clark said employees have been known to make sacrifices.

– Richard Thompson: 529-2346