FedEx Corp. said that it will cut the size of its global officer and director workforce by at least 10% and will consolidate certain teams and functions as it grapples with volume slowdowns and a cost structure that left it behind the curve in managing through the downturn.
In an internal memo to employees Tuesday, CEO Raj Subramaniam said the move is “critical” to ensure that Memphis, Tennessee-based FedEx (NYSE: FDX) remains competitive in what has become a highly dynamic environment. The macroeconomic weakness has forced the company to examine “closely our leadership team and [the] functions that could be consolidated,” Subramaniam said.
The memo did not specify what teams or functions will be consolidated. FedEx has about half a million worldwide employees. It did not detail how many executives would be impacted.
In all, FedEx has eliminated about 12,000 jobs since the June 1 start of its 2023FedEx reported subpar fiscal 2023 first-quarter earnings, which it blamed mostly on a sudden and dramatic drop-off in trans-Pacific volumes and an inability to cut costs fast enough at its FedEx Express air and international unit to align with the lower demand.
Satish Jindel, the president of consultancy ShipMatrix, has been closely involved with FedEx for years and applauded the move to streamline the company. However, the lack of clarity and specifics in the memo as to which operating units will be affected may cause concern among managers and other employees who are below the officer and director levels, he said.
Jindel said he is worried that an elevated level of uncertainty will have an impact on productivity on employees who have worked for those executives whose jobs are being eliminated.
In the first quarter, FedEx unveiled a program called DRIVE, with the objective to save $4 billion in annual costs by fiscal year 2025, which begins in June 2024. Most of those cost savings would be permanent, the company said.
On its fiscal second-quarter earnings call, FedEx said it had identified $1 billion in additional savings since September. Those savings were not related to the DRIVE program.
FedEx also cut its FY 2023 capital spending levels to $5.9 billion, a $400 million reduction from recent levels and $900 million below its original projections for the fiscal year.