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FedEx Offers Buyouts to Cut Costs

August 13, 2012
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FedEx Corporation announced Aug. 13, 2012, that it will offer voluntary buyout incentives to certain U.S.-based employees in mostly non-operational staff groups as part of a broader plan to improve efficiencies and reduce costs.

The world's second largest package delivery company hinted at cutbacks earlier this summer when it said that slowing economic growth would crimp its earnings well into next year. It has already removed some aircraft from its fleet of more than 600 to account for a loss of demand.

According to a statement, it is anticipated that "the vast majority of employees eligible for these incentives will be staff employees at FedEx Express and FedEx Services."

Express is where FedEx got its start in 1971, and it's still the company's biggest segment by far. The speedy shipping division, which moves 3.5 million packages on an average day, has been hit hard as people shift to slower delivery methods to conserve cash. The unit is also being dragged down slowing Asian growth and a reduction in demand for Asian goods from the U.S. and Europe.

Services is FedEx's behind-the-scenes logistics division, but it also includes FedEx Office, formerly Kinko's.

Analysis is underway to determine which workgroups will be eligible for these incentives, as well as permitted participation levels by functional area.

These incentives will not include any changes to retirement eligibility or payments, though FedEx said those that are close to retirement are also eligible for buyouts.

And second-quarter results released in late July by larger rival United Parcel Service Inc. suggested that the global economic slowdown may be even worse than FedEx anticipated.

Their primary competitor, UPS, lowered its forecast for all of 2012 and said its third-quarter earnings will fall below last year's results, with many customers fearing what's in store for the second half of the year. Their skittishness was also felt in the second quarter, where UPS missed analysts' expectations for both earnings and revenue.

UPS also said it's making cuts in its business to make up for the shortfall. It predicts global trade will grow even slower than the world's economies — a trend not seen since the recession.

Shares of FedEx Corp. rose 9 cents to $87.89 in early morning trading Monday. UPS lost 30 cents to hit $76.

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