[1/2]A view of signage at a FedEx Ground distribution center in Carson, California, U.S. September 16, 2022. REUTERS/Bing Guan/File Photo
LOS ANGELES, June 20 (Reuters) – FedEx (FDX.N) announced on Tuesday that it will merge its contractor-based land delivery operations in Canada into its company-operated Express unit, converting contractors into employees.
The move, to be phased in from April 2024, comes at a time when the global delivery company is transforming its business to increase profits and better compete with competitors like United Parcel Service (UPS.N), Amazon.com (AMZN. O) and be able to compete with regional delivery companies.
The merger of Canadian delivery operations would result in more than $100 million in annual cost savings when completed in fiscal 2025, FedEx CEO Raj Subramaniam said on a conference call with investors.
FedEx made a similar change in the US states of Alaska and Hawaii last year.
Still, the company said there will be U.S. markets where packages will be shifted from Express to Ground, its outsourced delivery arm. In those cases, the company said it would continue to use delivery firms as part of its “hybrid” working model.
Memphis, Tennessee-based FedEx announced in April that it plans to combine the two delivery entities to reduce costs and streamline service. Competitor UPS, known for its tight cost controls, operates only one delivery network.
FedEx’s effort to combine operations is part of a broader effort to reduce costs by $4 billion by the end of fiscal 2025. FedEx announced that cost-cutting plan in June 2022, about two weeks after activist investor DE Shaw won two additional seats on the board.
Reporting by Lisa Baertlein in Los Angeles; Adaptation by Leslie Adler, Lisa Shumaker and Chris Reese
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Lisa Bartlein