VOL. 123 | NO. 247 | Thursday, December 18, 2008
FedEx To Cut Salaries 5%, Suspend Bonuses, Freeze 401(k) Contributions
By SAMANTHA BOMKAMP AP Business Writer
NEW YORK (AP) — FedEx will cut salaries 5 percent for all U.S. salaried personnel as a result of the weak economy, as well as make even deeper pay cuts for senior executives, eliminate some bonuses and implement a one-year freeze in contributions to 401(k) private retirement accounts.
Chief Executive Frederick W. Smith said the company's earnings are "increasingly being challenged by some of the worst economic conditions in the company's 35-year operating history."
On Jan. 1, CEO Smith will take a 20 percent pay cut, and other top brass will take a reduction in pay between 7.5 percent and 10 percent.
FedEx has already begun more that $1 billion in cost-saving measures including job cuts across its FedEx Freight and FedEx Office divisions, a reduction of some workers' hours, elimination of certain bonuses and implementation of a hiring freeze.
The company also said it is cutting jobs in its FedEx Office unit, and will close some store locations as the company anticipates business at its copy and shipping stores will continue to wane.
Combined, the company expects these measures to save $200 million through the remainder of the fiscal year ending in May and $600 million in the next fiscal year.
FedEx affirmed its forecast for 2009, after cutting the outlook last week. FedEx said that weakenening global economic conditions are offsetting sizable savings from a steep drop in fuel prices and the benefit of new customers from German-owned DHL, which is dramatically scaling back its U.S operations.
FedEx Corpsaid Wednesday its fiscal second-quarter earnings rose 3 percent, narrowly topping Wall Street's expectations, but it announced further cost cuts as demand continues to slump.
The Memphis-based company earned $493 million, or $1.58 per share, compared with a year-ago profit of $479 million, or $1.54 per share. Revenue rose 1 percent to $9.54 billion.
Analysts polled by Thomson Reuters predicted a profit of $1.57 per share on revenue of $9.87 billion.
FedEx did not issue a third-quarter earnings prediction, citing economic uncertainty, but said it expects to earn between 69 cents and $1.94 per share across the third and fourth quarters. Analysts polled by Thomson Reuters predict third-quarter earnings of 54 cents, and fourth-quarter earnings of 85 cents per share.