FedEx Corp. took another step Tuesday, Dec. 4, in its reaction to a slow growth global economy as well as its own desires to make major changes to the oldest division of the Memphis-based global corporate giant.
FedEx Corp. has sent employees the terms of a coming buyout package.
(Daily News File Photo: Lance Murphey)
The company sent out terms of a coming buyout package to employees Tuesday.
All of the U.S. employees who got the notice this week will not be eligible to apply for the buyouts.
Employees in the Corporate, Express, Services and TechConnect divisions of FedEx in the U.S. with at least five years of continuous service at FedEx as of Nov. 30 will get buyout packets in February. Preference would go to those with the most seniority in their section if more employees in a section accept the offer than there are slots.
Meanwhile, analysts and investors will be listening closely Dec. 19 for further details of the larger changes at FedEx as the company reports quarterly earnings figures. The conference calls with FedEx usually feature lots of questions for and comments by FedEx founder and CEO Fred Smith about global economic conditions and his view of what the future holds.
FedEx’s performance is tied closely to economic growth or the lack of it as reflected in gross domestic product.
The eligible FedEx employees who get the buyout packets in mid-February have until April 1 to make their decisions. The company will select who gets the buyouts in May and those employees would leave FedEx starting in late May.
FedEx spokesman Glen Brandow said the company is not offering any numbers yet on how many employees it hopes will take the buyout or a dollar figure the company hopes to realize from the voluntary buyouts.
“Those decisions will be made based on the needs of individual work groups and the business as a whole. There are no new numbers or dollar amounts or anything of that nature,” he said. “Most of the employees that would be eligible would be in those business units.”
Key terms include four weeks of base salary for every year of continuous service with a cap at two years of base pay.
And the offer will include a $25,000 health care credit that can be used over five years including for insurance premiums.
The buyouts would take effect in three phases starting in the year that begins in June 2013 with FedEx management assessing how many take the terms in each phase and each work group and then adjusting accordingly.
There is not a fallback position that would revert to automatic layoffs if enough people don’t take the buyouts.
FedEx executives said in October that the buyout will cost the company approximately $600 million, which would be split over two fiscal years. That was also when Smith told investors that the company has set a goal of increasing its profitability by $1.7 billion a year. Most of that will come from reductions in FedEx Express.
The oldest division of FedEx, Express has been hit hard by the rise in jet fuel prices that have dramatically changed the nature of passenger airline business. In the case of FedEx, those changes have combined with customers who have been shifting over several years away from air delivery of goods.
As that shift broadened into a slowdown in economic growth in Europe and Asia this year, the FedEx front office reacted with the profitability goal at the annual investors day in October.