Saturday, December 20, 2008

Fed Ex Chairman says things are bad

Back on Nov. 10, 2008, I wrote Beware Owners Giving Glowing Reports, with regard to the rosy forecast given by the chairman of DryShips.

Fed Ex's chairman is certainly not giving any rosy reports.

FedEx Slashes Spending
Thomas L. Gallagher
Web Editor

FedEx earnings increased just 3 percent in the quarter ending Nov. 30. Revenue inched up 1 percent during what Chairman, President and CEO Frederick W. Smith called "the worst economic conditions in the company's 35-year operating history."

"With the decline in shipping trends during our second quarter and the expectation that economic conditions will remain very difficult through calendar 2009, we are taking additional actions necessary to help offset weak demand, protect our business and minimize the loss of jobs," said Smith.

The company eliminated variable compensation payouts and instituted a hiring freeze. Labor hours and line-haul expenses will be reduced along with volume. The company has cut discretionary spending. FedEx announced some personnel reductions at FedEx Freight and FedEx Office. There may be more.

In addition, CEO Smith will take a 20 percent cut in base salary. Salaries for other senior executives will be cut 7.5 percent to 10 percent. FedEx will reduce remaining U.S. salaried exempt salaries 5 percent. Merit-based salary increases will be eliminated in calendar 2009 for U.S. salaried exempt personnel. The company will suspend 401(k) matching contributions for a minimum of one year, beginning Feb. 1.

FedEx reaffirmed its earnings estimate of $3.50 to $4.75 per diluted share for fiscal 2009, which assumes weak global macroeconomic conditions, anticipated volume gains from DHL and stable fuel prices.

The volume gains from DHL is because DHL announced they are pulling out of the domestic delivery market in the U.S. This now leaves only Fed Ex, UPS and the U.S. mail to get us those packages. You know, those from Grandma, or Amazon.

The consolidations we will see during this economic downturn will end up costing us consumers more money, once the economy improves. That's because there will be less competition.

But, that's just the way things go.

Remember when the post office was the only way to ship small packages? No? Oh, then you probably don't remember when Kennedy was shot either.

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