MEMPHIS, Tennessee — FedEx, the package delivery giant, announced on Wednesday that it plans to merge all of its ground, air, and other operations into a single entity by June 2024 as part of a $4 billion cost-cutting plan. FedEx Express, FedEx Ground, FedEx Services, and other operating companies will be rolled into Federal Express Corporation, a unified, fully integrated air-ground network. The company’s freight transportation services division, FedEx Freight, will continue to operate as a standalone company under the corporation. Raj Subramaniam will serve as the President and CEO of the combined organization.
The new structure is aimed at facilitating the company’s DRIVE transformation, which includes Network 2.0, a multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the US and Canada. The unified organization will bring a distinct focus on the air network and international volume, as well as a more holistic approach to ground operations utilizing both FedEx employees and contracted service providers.
The announcement was made at the company’s DRIVE Investor Event, where it was also revealed that John A. Smith would become President and CEO of US and Canada Ground Operations at FedEx Express, effective April 16, 2023. Richard W. Smith will serve as President and CEO, Airline and International at FedEx Express, overseeing all other regions and FedEx Logistics.
The DRIVE transformation, which spans 14 domains across four major areas, is expected to generate $4.0 billion of permanent cost reductions in fiscal 2025. The company also approved an increase in the annual dividend rate on its common stock by 10%, or $0.44 per share, to $5.04 per share for fiscal 2024. The board declared a quarterly cash dividend of $1.26 per share of FedEx common stock, payable on July 3, 2023.
FedEx also announced changes to its executive compensation program, stating that its cash-based long-term incentive plan for fiscal 2024 through fiscal 2026 would include a Return on Invested Capital (ROIC) performance metric. This change is designed to further align management compensation with stockholder value, with ROIC being a key metric by which to measure the long-term success of FedEx.
The DRIVE Investor Event was webcast from the company’s website at investors.fedex.com, where individuals could view the presentation and download the materials presented during the meeting. This release contained only a short summary of the information presented and should be read in conjunction with the management presentations and other materials, including the appendix of non-GAAP financial measures, made available on the Investor Relations website.
