MrFedEx
Engorged Member
I titled this post specifically for the purposes of search engines. When someone wants to know what is happening in reference to today's announcement it will "hit" here first.
Dear FedEx Investors,
From all of the press I've seen today regarding Fred S's restructuring announcement, analysts are very pleased with what he had to say. The stock shot-up over $4 per share and Mr. Smith promised improved dividends to go along with cost-cutting moves.
However, here's what you really should know about FedEx and it's future from an insider (employee) perpective. First, FedEx is severely mis-managed, and the impression that this organization is well-run is simply incorrect. Simply put, the Express division is imploding. For years now, Fred S and his upper management team have been rewarding themselves with lavish salaries and perks. In fact, Mr. Smith doubled his compensation several months ago. Instead of investing in the company, Mr. Smith has spent millions on anti-labor legislation, and useless upgrades to an outdated, obsolete fleet of aircraft based on the DC10/MD10/MD11 family of aircraft. When twin engine jet cargo aircraft became available during the late 1980's, FedEx largely ignored them, and focused on buying many aging DC10 passenger aircraft and spending many millions converting and upgrading them to MD10 standards. These "20 year" aircraft will be scrapped or parked to rot in the Arizona desert after just a few years of service.
The purchase of Kinko's, which was subsequently renamed FedEx Office, has been an unmitigated disaster. Mr. Smith wasted $2B re-branding Kinko's, and has created a hughly dysfunctional organization that will continue to be a drag on profitability for years to come.
FedEx has continually made bad decisions, and will continue to do so, as long as the current upper management team remains in place. Labor troubles are imminent at the Express division as benefits and pay are cut from already spartan levels. The new generation of FedEx employee simply won't be able to be as productive as competent veteran employees, and poor pay will assure high turnover rates in positions that demand a fairly high level of intelligence and skill.
FedEx is counting on new technology to "replace" experienced workers. Based on the utter failure of the very expensive ROADS technology, it's replacement technology (Dynamic ROADS) isn't likely to be much better. Mr. Smith's plan to replace highly-skilled workers with off-the-street replacements is not going to be successful.
FedEx is also a haven for lawsuits, with many more potential suits (and settlements) in the pipeline. Watch for Age Discrimination, Minority Discrimination, Environmental, and Unpaid Labor class actions in the near future. For example, FedEx Express just settled a suit in California for $40M in which employees were forced to work through lunch breaks and otherwise break labor laws. More suits should be forthcoming from other states.
FedEx Ground is likely to be a prime source of future litigation. For now, the Ground business model has been deemed to be legal. FedEx contractors utilizing underpaid non-employees who are held to true employee standards work for far less than their UPS counterparts, which is the source of FedEx Ground's tremendous cost and profit advantages over UPS. This is likely to change in the near future as litigation challenging the Ground business model makes it's way into court. Simply put, the Ground model will eventually fail the "degree of corporate control" test that differentiates contractors from actual employees.At that point, the operating costs of the Ground model will skyrocket, negating much of both the cost savings and profit promised by Fred S today.
Until the current upper management steps aside, the $1.7B savings/profit goal announced today will be largely unattainable. Mr. Smith needs to be replaced with a younger, more dynamic leader with new ideas that actually make sense in the real world, not the fantasy world in which Mr. Smith apparently exists. The same can be said for much of his upper management team. Bloated salaries, poor decisions, and poor financial results seem to be their specialty. They simply won't be able to deliver on the promises Mr. Smith made today.
Invest your money elsewhere, because placing your trust in the competence of Fred S is a major mistake.
Dear FedEx Investors,
From all of the press I've seen today regarding Fred S's restructuring announcement, analysts are very pleased with what he had to say. The stock shot-up over $4 per share and Mr. Smith promised improved dividends to go along with cost-cutting moves.
However, here's what you really should know about FedEx and it's future from an insider (employee) perpective. First, FedEx is severely mis-managed, and the impression that this organization is well-run is simply incorrect. Simply put, the Express division is imploding. For years now, Fred S and his upper management team have been rewarding themselves with lavish salaries and perks. In fact, Mr. Smith doubled his compensation several months ago. Instead of investing in the company, Mr. Smith has spent millions on anti-labor legislation, and useless upgrades to an outdated, obsolete fleet of aircraft based on the DC10/MD10/MD11 family of aircraft. When twin engine jet cargo aircraft became available during the late 1980's, FedEx largely ignored them, and focused on buying many aging DC10 passenger aircraft and spending many millions converting and upgrading them to MD10 standards. These "20 year" aircraft will be scrapped or parked to rot in the Arizona desert after just a few years of service.
The purchase of Kinko's, which was subsequently renamed FedEx Office, has been an unmitigated disaster. Mr. Smith wasted $2B re-branding Kinko's, and has created a hughly dysfunctional organization that will continue to be a drag on profitability for years to come.
FedEx has continually made bad decisions, and will continue to do so, as long as the current upper management team remains in place. Labor troubles are imminent at the Express division as benefits and pay are cut from already spartan levels. The new generation of FedEx employee simply won't be able to be as productive as competent veteran employees, and poor pay will assure high turnover rates in positions that demand a fairly high level of intelligence and skill.
FedEx is counting on new technology to "replace" experienced workers. Based on the utter failure of the very expensive ROADS technology, it's replacement technology (Dynamic ROADS) isn't likely to be much better. Mr. Smith's plan to replace highly-skilled workers with off-the-street replacements is not going to be successful.
FedEx is also a haven for lawsuits, with many more potential suits (and settlements) in the pipeline. Watch for Age Discrimination, Minority Discrimination, Environmental, and Unpaid Labor class actions in the near future. For example, FedEx Express just settled a suit in California for $40M in which employees were forced to work through lunch breaks and otherwise break labor laws. More suits should be forthcoming from other states.
FedEx Ground is likely to be a prime source of future litigation. For now, the Ground business model has been deemed to be legal. FedEx contractors utilizing underpaid non-employees who are held to true employee standards work for far less than their UPS counterparts, which is the source of FedEx Ground's tremendous cost and profit advantages over UPS. This is likely to change in the near future as litigation challenging the Ground business model makes it's way into court. Simply put, the Ground model will eventually fail the "degree of corporate control" test that differentiates contractors from actual employees.At that point, the operating costs of the Ground model will skyrocket, negating much of both the cost savings and profit promised by Fred S today.
Until the current upper management steps aside, the $1.7B savings/profit goal announced today will be largely unattainable. Mr. Smith needs to be replaced with a younger, more dynamic leader with new ideas that actually make sense in the real world, not the fantasy world in which Mr. Smith apparently exists. The same can be said for much of his upper management team. Bloated salaries, poor decisions, and poor financial results seem to be their specialty. They simply won't be able to deliver on the promises Mr. Smith made today.
Invest your money elsewhere, because placing your trust in the competence of Fred S is a major mistake.
