FedEx Delivers Bad News on the U.S. Economy

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Fedex
It's been three years now since Warren Buffett announced the end of the Great Recession, and told Americans, in effect, that things can only get better from here.

But Monday morning, FedEx (FDX) employees got a different memo from their bosses: With fiscal fourth-quarter profits down, and full-year cargo volume dropping for the first time in more than two years, it's time to tighten belts and jettison some crewmen.

Hoping to give its profits some lift, FedEx announced that it will begin offering "voluntary" buyouts to its staff. Details are still being worked out, and FedEx says it won't reveal the whole extent of the program until its investors and lenders meeting in Memphis on Oct. 9 and 10.

But for now, FedEx has confirmed that the buyouts will primarily focus on "non-operational staff," and in particular, employees at FedEx Express and FedEx Services.

What Does It Mean to You?

Viewed in isolation, this might not seem like big news. But viewed in the context of similar buyout initiatives at Ford (F) and General Motors (GM), and Google's (GOOG) just-announced layoff of 4,000 Motorola Mobility workers, FedEx's announcement actually appears to be part of a trend in America today. And what is this trend?

Not to put too fine a point on it, but the economy's slowing. Big companies are starting to lay off workers again -- just like back in the bad old days of 2008. And that big jobs gain we saw in the July unemployment report a couple of weeks ago? It was a fluke.

Not Playing Politics

Some may be tempted to spin FedEx's announcement, and in particular, the October release date as an attempt to sway the results of the November presidential election. (It wouldn't be the first time this has been tried.) This doesn't seem to be the case, though.

To the contrary, FedEx says it will spread out the redundancies, and the costs thereof, "over several quarters in fiscal 2013 and 2014." If anything, FedEx appears to be going out of its way to ensure its bad news doesn't affect results at the November polls. That's good news for President Obama. It will be small consolation, though, to the workers who will be losing their jobs.

And for the rest of us? A slowing economy that's causing layoffs throughout the economy isn't such great news either.

Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of Ford Motor and Google. Motley Fool newsletter services have recommended buying shares of General Motors, Google, FedEx, and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor.



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216 Comments

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John

I don't know about the bigger picture, but I stopped using FedEx a few months ago. Why?
1. We didn't need two shippers (not enough volume for both)
2. UPS and FedEx had similar pricing
3. UPS assigns the same drivers to their routes for months, even years, allowing a friendly, personal relationship to bloom. Our guy, Rick, is a PRINCE. He bends schedules to fit our special needs. He has a company cell phone we can call. We always have a cold bottle of water for him in blistering S. Fla afternoons.
It was the personal part that drove our decision.

August 16 2012 at 7:49 AM Report abuse -2 rate up rate down Reply
AreDubya

But the CEO is getting his money and putting people out of a job. Like $13,000,000.00.

August 15 2012 at 12:17 PM Report abuse -2 rate up rate down Reply
AreDubya

but the CEO

August 15 2012 at 12:12 PM Report abuse -1 rate up rate down Reply
George

FedEx is just one of many coming down the road to higher unemployment. Major defense contractors have already given warning earlier this year they would issue 'pink' slips in October before the election for the end of the year. This will have a trickly effect like you have never seen when you consider the size of the employers and all the small businesses that feed the nuts & bolts to them for those plans, tanks, and ships along with all the equipment/gear to keep the military working. The reason for this is a non-working, king of the campaigners and congress doing NOTHING to resolve the pending mass reduction in government funds that will create this monster. This worthless leader has not had a single budget of his own; last one was Bush before he left office. We have been living off of "continuing resolutions" for almost 4 years while the non-working president has done nothing to SIT down with both parties (which is common) to resolve the differents in parties to keep our once great nation functioning. If you ever thought your vote makes no differences, folks, this time around it will make the difference of a bankrupt contry lead by a socialist LAMEDUCK who has clearly stated to the russian puke that after the election he will have more 'flexibility' which is a fast moving 'executive order' signing pen and what I believe will be his attempt to take away freedom in our country like you have not seen since Hitler. Letting millions of 'illegals' is just one step in his becoming the socialist king of a bankrupt country where the vast majority will be entirely dependent on the government (much like a lot of his relatives today) and as always when you have all the non-working uneducated minority which can be led by the nose you have a king and his sub-servants.
Laugh as you may at this old man but I am well educated, wealthy beyond having a need, and have seen this in others countries I have lived in to know it is not fiction folks, it can happen right here in America.

August 15 2012 at 12:08 PM Report abuse +1 rate up rate down Reply
1 reply to George's comment
rdtm13

I know u r 100& correct! don't listen to any of the politicians words(they r all lies), instead look at the actions of all the politicians, that will show us the ways that the politicians are deceiving the american public.

September 15 2012 at 7:16 PM Report abuse rate up rate down Reply
rides4all

All those illegals brought in and the jobs taken from US citizens was someone elses fault! No jobs, no money, Only Obama could be stupid enough to open the borders as well! :(

August 15 2012 at 9:00 AM Report abuse +1 rate up rate down Reply
kimba6868

And let's not forget that as of today, Obama has started his own DREAM ACT by letting up to a million illegal aliens, children under 30 who came here with their illegal parents can now stay in our country and receive work permits. That should help out all of unemployed AMERICANS...don't cha think?

August 15 2012 at 8:22 AM Report abuse rate up rate down Reply
maa2626

I guess if obama loses the election we can bame it on FedEX. for those of you in rio linda read the blue captioned writing in italics

August 14 2012 at 7:36 PM Report abuse -2 rate up rate down Reply
lawoff414

I have read all the post, and I believe that santopar and omboehner are the same person. Further, I think that both of these posters have a very severe case of cranial rectal inversion.

August 14 2012 at 5:22 PM Report abuse rate up rate down Reply
2 replies to lawoff414's comment
j_swizzle

But that would indirectly mean that, that same person has their head shoved so far up their buttocks that it would be impossible to retract it. Am I right?

August 14 2012 at 5:25 PM Report abuse -1 rate up rate down Reply
1 reply to j_swizzle's comment
mrspelosi

Right again doll.

August 14 2012 at 5:27 PM Report abuse rate up rate down
j_swizzle

Is that "CRI" covered in Obama care?

August 14 2012 at 5:31 PM Report abuse -1 rate up rate down Reply
3 replies to j_swizzle's comment
toddisit

We do go out of our way to produce low wage jobs in other countries. That gives me a nice, fuzzy feeling!

August 14 2012 at 5:13 PM Report abuse +3 rate up rate down Reply
1 reply to toddisit's comment
j_swizzle

I think that Barack's job creator, Jeffery Immelt will help you continue to get that warm fuzzy feeling that you are looking for. So far he has a bad record for creating any jobs here in America. It kind of makes you wonder why Barack hired him. Isn't it Ironic that GE paid no income taxes at all and still received millions in returns from this administration? If I didn't know any better, I'd say they are all in cahoots together.

August 14 2012 at 5:18 PM Report abuse rate up rate down Reply
5 replies to j_swizzle's comment
BudThePatriot

And as Our Government,the Obama Administration keeps giving the Chinese the Contracts to Rebuild Americas old Bridges,highways etc ...Thanks to Obama and all His supporters who will also soon be out of work cause what goes around comes around..each job depends on another's..thank Them all for putting an idiot in the whitehouse..

August 14 2012 at 5:11 PM Report abuse -1 rate up rate down Reply