Dive Brief:
- FedEx aims to create "a seamless transition" for customers as it gears up to spin off its less-than-truckload unit FedEx Freight, President and CEO Raj Subramaniam said on an earnings call Dec. 19.
- After the spinoff, slated to happen within the next 18 months, FedEx Freight will keep operating under its current name, according to an announcement of the plan. It will also continue to cooperate with FedEx via commercial, operational and technology agreements.
- For example, Freight will continue to provide linehaul support for FedEx when needed, including during the peak holiday shipping season, Subramaniam said. Minimal change will be necessary to maintain that support, since Freight already gets direct financial benefits for supporting FedEx via intercompany agreements.
Dive Insight:
FedEx noted in its quarterly report that retaining existing relationships with customers is a risk factor of the spinoff, but Subramaniam vowed that "it's business as usual" for shippers using FedEx Freight. The carrier will look to sustain or improve service to shippers while keeping FedEx Freight President Lance Moll at the helm.
"We're excited to create a leading LTL pure-play, the largest carrier by revenue with the broadest network and the fastest transit times," Subramaniam said. "FedEx Freight has deep relationships with customers who turn to us for our reliability, simplicity and choice of services."
FedEx Freight will also begin hiring more than 300 LTL specialists on its sales force starting in January, which will result in better customer support, FedEx EVP and Chief Customer Officer Brie Carere said. The hires will add to the 75 sales reps FedEx currently employs to handle large accounts at Freight.
Most of FedEx Freight's volume from customers is tied to standalone LTL contracts, according to Carere. "Those contracts will be honored" as FedEx advances the spinoff process, she said.
Despite various ties with FedEx's other operations, FedEx Freight has long pushed to negotiate Freight contracts separately. This was the result of a pivot the company made several years ago to better compete in a fragmented market, according to Carere.
However, most small customers using FedEx Freight have a bundled contract that also includes parcel shipping services, according to Carere. The company's approach for these shippers amid the spinoff process "will be slightly nuanced," she added, because FedEx's earned discount program is prominently featured in small customer agreements.
"The way the earned discount program works is that as they ship more FedEx Freight or more LTL, you actually get incremental benefit on your parcel side," Carere said. "So there is some potential benefit from small customer improvement, too."
