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VOL. 131 | NO. 190 | Thursday, September 22, 2016

FedEx Working on Drone and Automation Projects – With Caveats

By Andy Meek

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John Zimmer, co-founder and president of the on-demand ride-sharing company Lyft, thinks that in less than a decade private car ownership will essentially have ended in major U.S. cities. Also, that within five years most Lyft trips will take place in self-driving cars.

FedEx founder Fred Smith provided some color this week about how the company sees technology like drones and unmanned vehicles affecting future operations.

(Daily News File/Andrew J. Breig)

A few days after Zimmer sparked a wave of headlines about the future of autonomous autos, FedEx Corp. chairman, president and CEO Fred Smith had a somewhat more measured view about what’s in store.

Smith was asked during the Memphis-based package delivery giant’s latest earnings presentation to analysts this week for his thoughts on drone deliveries and unmanned trucks and how those might fit into FedEx’s operation. Smith’s message: essentially, that there’s a place for them, but people need to run the machines, not the other way around.

“Obviously, we at FedEx are very mindful of these trends,” said the FedEx founder, who on pretty much every earnings call now fields at least one question about robots, automation or Amazon’s logistics ambitions.

Where Zimmer sees a future dominated by automated cars, Smith – at least within the context of FedEx – said “it’s very difficult” to imagine in the foreseeable future a scenario where automation has largely replaced the need for “well-trained” pilots and drivers.

“We have a number of activities under way in robotics in the package-handling sector,” Smith acknowledged to analysts. “In terms of (unmanned aerial vehicles) in particular, we have five separate work streams of projects in both aviation and automated vehicles. The difference with us is we just prefer to keep working on those issues and tell you about them when they make a meaningful difference in the company.”

He pointed to the automation inherent in vehicles like the company’s planes that Smith said rank among the most sophisticated robotics technology in the world because of the flights and landings they can perform. Where he differs in a vision about what the future holds – he sees automation more as opportunity to improve productivity and safety rather than as a broad replacement for workers.

“We look at the use of automation more as opportunity to improve the productivity of those types of experts within our system to make their job more comfortable and easy and above all, to increase safety,” Smith said. “We think this technology will evolve incrementally over time with a great emphasis on safety first.”

The question gave the macro-oriented Smith an opportunity to talk broadly about the future of his bellwether company with a question that touched on sea changes in technology. It also inadvertently injected some humor into the proceedings, as the question – which was submitted via the Internet – included a pun asking whether FedEx planned to “go this route - LOL,” with Smith reading out the LOL in his familiar commanding tone.

The more immediate business of the conference call, which came a week before its annual meeting of shareholders in Memphis, showed a solid fiscal quarter for FedEx.

The company grew its profit to $715 million for the quarter ended Aug. 31 from $692 million during the year-ago quarter.

Revenue was also higher – $14.7 billion, versus $12.3 billion a year ago – during the quarter, the first three-month period since FedEx completed its acquisition of the parcel firm TNT Express.

Shares of the company hit a new 52-week high on Wednesday, Sept. 21, the day after the earnings announcement.

News of the results came a day after FedEx said its express, ground and freight subsidiaries will hike shipping rates effective Jan. 2, 2017.

Also looking ahead, FedEx executive vice president Mike Glenn said the company is “deep into planning” for what’s expected to be another record-smashing holiday shipping season.

Last year, he explained, the company saw a 15 percent growth in its peak holiday business that resulted in the delivery of 325 million packages. Since then, FedEx has added 19 automated stations and four major distribution centers to its ground subsidiary since the 2015 peak holiday season, in addition to adding more aircraft to the FedEx fleet, Glenn said.

He said FedEx expects to add more than 50,000 seasonal workers this year to handle the uptick in shipments.

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