Fed Ex, A Cautionary Tale for UPS?

[wkmac]

"FedEx is spending heavily on distribution hubs and hiring more employees to meet heaving demand for its shipping services, expenses that weighed on its second-quarter profit.


The Memphis, Tennessee-based company on Tuesday reported adjusted earnings that missed Wall Street expectations. Its shares fell 3 percent in after-hours trading."

FedEx Spending on Distribution Hubs Weighs on Its 2Q Profit


As UPSers, does this above bare watching especially come the end of January when UPS 2016' 4Q numbers emerge? Not to mention in the recent year or so the massive amount of announced infrastructure additions and upgrades to take place over the coming 3 to 5 year period ahead. And I believe that to just be for starters.

For example, in recent weeks UPS posted on its Plant Engineering website, nearly a dozen new projects just in the East Region alone of adding automated smalls sorters at UPS sites (most are 19.5k per hour production capacity with automated induction as I understand it) with a "Go Live" date of 11/1/2017. These projects coming on the heels of the announced new Mega Hub in Atlanta which itself follows major expansions announced for such hubs as Jacksonville Fla., White's Creek in Tennessee and the ongoing expansion projects at hub like Centennial, Ontario, Oakhaven to name just a few. Europe and Asia also exploding.

I completely support the infrastructure expansion we are seeing and will continue to see, albeit IMO coming about 5 years to late, but like FedEx who is also taking on a similar task, will we take a stock price hit for it?

Still worth it IMO long term but will Wall Street be patient and get the bigger picture?

 

[Europa]

Analysts build in the costs of.expansion. What has gone unsaid is that either the costs over ran, the projects took too long or the benefits have not come through as expected. Of course we run that risk too, but it is not just a simple matter of expansion temporarily hitting profits - I don't think the full picture has been teased out of Fedex.

 

[Fenris]

It may also be relevant that Fed-Ex has been building capacity on expectations of future growth, rather than current need - at least the last time i looked into it. UPS, on the other hand, is behind on capacity. UPS can reap immediate benefit from the capacity while Fed-Ex is not getting as good a short term return on investment.

 

[FrigidFTSup]

We're getting to the point in a lot of buildings where we just can not put anymore volume through. The investment in infrastructure is absolutely needed or we are going to have to start turning business away because we simply can not handle it.

The way FedEx is working on their expansion is a bit strange. They don't just overbuild a little, they go huge. There was a Ground building I know of that handled 4800 pieces a day. They upgraded and moved into a building that could do 48,000 pieces a day. Just absolute overkill. They were so proud of it, but I laughed driving by because they had this huge property and building, and it looked like they built it and nobody ever showed up for work.

 

[bbsam]

Actually at Ground they have a strange way of overbuilding. We recently moved into a building that was designed for 2008 and forward. Well, Here we are in 2017 and even with growth somewhat slower than expected, we will outgrow it by 2025. The one thing we aren't doing is trying to play catchup with infrastructure.

 

[MrFedEx]

It may also be relevant that Fed-Ex has been building capacity on expectations of future growth, rather than current need - at least the last time i looked into it. UPS, on the other hand, is behind on capacity. UPS can reap immediate benefit from the capacity while Fed-Ex is not getting as good a short term return on investment.

FedEx can afford to expand because Ground workers make about a third of what a UPS driver makes. Factor-in pension and benefits (they get zero), and it's more like a fifth. Add-in an Express opco that is union-proof and you've got lots of cash to build infrastructure.

The Trump administration assures that the FedEx Ground scam will be perpetuated, unions will be attacked and weakened, and also prevented. Ground drivers are really employees, but that's an argument for another time and place.

Given all of it's unfair advantages, FedEx can do whatever it wants and not worry about short-term vs. long-term investment.

 

[PT Car Washer]

FedEx can afford to expand because Ground workers make about a third of what a UPS driver makes. Factor-in pension and benefits (they get zero), and it's more like a fifth. Add-in an Express opco that is union-proof and you've got lots of cash to build infrastructure.

The Trump administration assures that the FedEx Ground scam will be perpetuated, unions will be attacked and weakened, and also prevented. Ground drivers are really employees, but that's an argument for another time and place.

Given all of it's unfair advantages, FedEx can do whatever it wants and not worry about short-term vs. long-term investment.

A large percentage of UPS workers (PT) also earn a third of what UPS drivers earn with no benefits. And with the new driver progression where new drivers earn less then 2/3 of a top driver for 4 years.

 

[Mr Shifter]

FedEx doesnt nearly pay out a dividend as UPS does. They use their earnings for growth.

 

[UpstateNYUPSer(Ret)]

A large percentage of UPS workers (PT) also earn a third of what UPS drivers earn with no benefits. And with the new driver progression where new drivers earn less then 2/3 of a top driver for 4 years.

Wait until the two tiered wage structure for new FT drivers becomes a reality.

 

[PT Car Washer]

Wait until the two tiered wage structure for new FT drivers becomes a reality.

The Centers that use TCD's already have a two tier wage system.

 

[40 and out]

Wait until the two tiered wage structure for new FT drivers becomes a reality.

And how many DECADES have you been saying this?

 

[UpstateNYUPSer(Ret)]

And how many DECADES have you been saying this?

Since I have only been a member since 10/31/07 the answer would be 1.

 

[MrFedEx]

FedEx doesnt nearly pay out a dividend as UPS does. They use their earnings for growth.

At Ground/HD the average wage is $12-$14 per hr. or a flat rate salary. There is no overtime for the vast majority of drivers, and no benefits whatsoever. The Express division also has low pay, with drivers starting in the $15-$17 per hour range depending on market level. No union, crap benefits, and 20+ year top-outs =low overall labor costs, although these are somewhat offset by tremendous turnover and low employee performance (compared with a UPS driver).

This saves Fred S a lot of money, which he indeed re-invests in new terminals, vehicles, and airplanes. When the Express division was making record profits, he told employees that the company couldn't afford decent raises. In the meantime, he was buying-up trucking companies, and building huge new Ground terminals.

At Ground, all costs possible are pushed to the contractor, who shills as an "independent businessperson", while holding drivers to employee standards. More profits for Smith, and more investment dollars available to buy new companies and steal market share from UPS.

 

[TearsInRain]

Amazon, FedEx, and UPS are all building or expanding like crazy; we have a little more catching up to do because of our reliance on human resources, but everyone is going to have the same story of stock hit

 

[Coldworld]

The Centers that use TCD's already have a two tier wage system.

Don't get him started... Please!!! We know ups has a 10 tier wage system....

 

[Coldworld]

Since I have only been a member since 10/31/07 the answer would be 1.

I've been a member since early 2000, Under a different name.. Do I get a prize???

 

[Coldworld]

At Ground/HD the average wage is $12-$14 per hr. or a flat rate salary. There is no overtime for the vast majority of drivers, and no benefits whatsoever. The Express division also has low pay, with drivers starting in the $15-$17 per hour range depending on market level. No union, crap benefits, and 20+ year top-outs =low overall labor costs, although these are somewhat offset by tremendous turnover and low employee performance (compared with a UPS driver).

This saves Fred S a lot of money, which he indeed re-invests in new terminals, vehicles, and airplanes. When the Express division was making record profits, he told employees that the company couldn't afford decent raises. In the meantime, he was buying-up trucking companies, and building huge new Ground terminals.

At Ground, all costs possible are pushed to the contractor, who shills as an "independent businessperson", while holding drivers to employee standards. More profits for Smith, and more investment dollars available to buy new companies and steal market share from UPS.

I remember seeing a news story and Fred S said outright that FedEx would never get into the ground business because the margins are too low....lol. A lot can change in 20 Years

 

[bacha29]

I remember seeing a news story and Fred S said outright that FedEx would never get into the ground business because the margins are too low....lol. A lot can change in 20 Years

When Fat Freddy bought out RPS/Caliber he didn't have the cash so he had to issue stock instead. Now thanks to "Fedex Ground" he's sitting on stacks of it. Enough to embark on a massive expansion program and pay stock dividends.