FedEx Freight Plans for the Long Haul

Pat Reed sees nothing but continued growth and increased market share for the freight segment of FedEx Corp. of Memphis.

He attributes the outlook to FedEx’s strong brand recognition and continued strategic movements within the market.

“The key is to be ahead of the challenges,” Reed said. “We’ve got a strategic outlook, not just for today or just next year.”

FedEx makes plans for farther down the road, he said.

In October of 2004, Reed was promoted from CEO of the division’s east facility in Harrison to executive vice president and chief operating officer of the entire FedEx Freight segment, which includes a west facility in San Jose, Calif., as well as regional facilities across the country.

The Harrison operation is the less-than-truckload (LTL) company that was formerly American Freightways Corp.

Reed had been corporate vice president and chief operating officer for the FedEx subsidiary but took over the top role with the retirement of Tom Garrison, son of the late founder, Sheridan Garrison, in 2002.

American Freightways sold to FedEx on Feb. 9, 2001, for about $1.2 billion, an estimated 61 percent premium over the company’s stock value at the time.

Despite his nationwide responsibilities, Reed continues to office mostly out of Harrison, with frequent trips to FedEx’s headquarters in Memphis, he said.

The FedEx freight segment includes FedEx Freight, FedEx Custom Critical (surface-expedited transportation) and Caribbean Transportation Services (airfreight forwarding).

FedEx’s net income grew by 18 percent from $710 million by year-end May 31, 2002, to $838 million by year-end 2004.

The freight segment alone had 2004 revenues of $2.68 billion up from $2.44 billion a year earlier. Operating income was up 26 percent to $244 million in 2004, from $193 million at the end of 2003. The company does not separate out its east and west divisions for comparison.

Reed said FedEx hasn’t had the same experience with driver shortages that have plagued the trucking industry in recent years. Instead of fighting a throng of recruiters, FedEx offers to train qualified employees to receive their commercial driver’s licenses.

The benefits to the program are two-fold Reed said. First it creates a sense of loyalty among employees, who have increased opportunity, and that helps with overall retention.

Second, FedEx benefits from having employees with a greater range of skills. Many drivers can convert to warehouse positions during slower times and fewer resources are used to re-train, he said.

“Our turnover has dropped drastically,” he said.

The freight segment employs about 26,000 nationwide and about 1,200 in Harrison alone.