News Column

FedEx Details Buyout Program

Dec 4, 2012

Wayne Risher


FedEx Corp. announced details Tuesday of a voluntary buyout program designed to trim the U.S. domestic workforce next year.

Eligible employees will be notified Feb. 15, and buyout packages would max out at two years of base pay, the company said.

Employees would have until April 1 to decide whether to apply, and they would be told in early May whether they're accepted.

The workforce reduction is part of a push to improve profitability by $1.7 billion a year. FedEx isn't saying how many employees it wants to trim.

The company notified about 115,000 U.S. employees in August that the buyout program was coming and that it would be aimed at certain nonoperational staff members.

Employees in FedEx Express, FedEx Services, the corporate office and FedEx TechConnect were notified by email Tuesday morning of the buyout program's components and timeline. Express and Services employ about 28,000 in Tennessee, most of them in the Memphis area.

Program components include four weeks of gross base salary as of Nov. 30, for every year of continuous service. The maximum buyout available will be two years of base pay. To be eligible, employees would need to have at least five years continuous service with the company as of Nov. 30.

The package also would provide for a health-care reimbursement arrangement through a one-time, $25,000 credit that can be used over five years for qualified expenses including insurance premiums.

"We want to make it clear it's a voluntary program, and we're committed to doing the right thing for our people," said spokesman Glen Brandow. "We think it will be an attractive program for employees depending on their personal circumstances. The timeline allows them plenty of time to evaluate it."

The company said it will communicate a future organizational structure to employees in early February and send voluntary buyout packets by email to eligible employees Feb. 15. They would have 45 days to sign and submit a voluntary buyout agreement by April 1.

If too many employees apply for buyouts in a particular workgroup, preference would be given to those with the longest continuous service.

Departures would occur in three waves between May 31, 2013 and May 31, 2014.

The reductions will be staggered to make sure service levels are maintained. "We're committed to continuing the outstanding service that we provide to our customers, so there's a very clear, well thought out plan for this voluntary program," Brandow said.

Analysts say the personnel reduction is key to FedEx's attempt to reduce a bloated cost structure in the domestic Express operation, which has lagged behind the high-performing FedEx Ground unit.

Company officials in October outlined plans to revamp the cost structure through a combination of cost reductions, efficiency improvements and service repositioning. They said productivity improvements made possible by cloud computing technology would allow them to reduce staff without harming service levels.

FedEx Express, the company's flagship overnight and time-definite delivery arm, has 102,000 U.S. employees including about 23,000 in Tennessee.

Word of the buyout came after the company in May announced plans to speed replacement of older aircraft with newer, more fuel-efficient models.

The fleet modernization program calls for 48 Boeing 727s, four MD-10s and 10 MD-11s to be replaced by newer, more-fuel-efficient aircraft, including Boeing 757s, 767s and 777s over the next five years.

The company's goal is operating margins of at least 10 percent in all of its operating segments: Express, Ground and Freight.

Source: (c)2012 The Commercial Appeal (Memphis, Tenn.). Distributed by MCT Information Services.

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