(Bloomberg) -- FedEx Corp. is planning to slash as many as 6,300 jobs in Europe as the courier completes the process of combining its operations with the TNT Express unit it purchased in 2016.
The reduction will address the duplication from maintaining two European delivery networks and generate pretax costs of as much as $575 million through fiscal 2023, FedEx said in a regulatory filing Tuesday. The proposed cuts, which have been presented to employee representatives, will yield annual savings of as much as $350 million starting in 2024.
Reducing redundancies and integrating its networks will allow the parcel-delivery giant to offer “greater coverage, speed of delivery, extended operational capabilities and enhanced service levels.” Karen Reddington, president of FedEx Express Europe, said in the filing.
FedEx swooped in to buy TNT more than four years ago to spearhead its expansion in Europe after regulators blocked United Parcel Service Inc. from buying the Dutch courier. The deal for 4.4 billion euros (almost $5 billion at the time) became more expensive to integrate after a cybersecurity attack in 2017 crippled the operations of several companies including TNT, upending FedEx’s plans to reap the rewards of its largest-ever acquisition.
Costlier Combination
Before the attack, which froze computer systems and caused customers to look for other options, FedEx had estimated the integration of TNT would cost $800 million and take four years. Now, the company is estimating a $1.7 billion expense from the merger process and expects that the physical networks won’t be fully combined until in early 2022.
The shares rose less than 1% to $253.67 at 10:44 a.m. in New York. FedEx soared 59% during the 12 months ending Jan. 15, buoyed by surging demand for residential deliveries during the coronavirus pandemic. That outpaced UPS’s 35% advance and the 15% gain of the S&P 500 Index.
A consultation about the job cuts will take 18 months in accordance with local regulations, FedEx said. Employees may be reassigned to other jobs or get priority access to open positions.
FedEx said it would maintain its existing hubs in Paris and Liege, Belgium. The operation in Paris’s Charles de Gaulle airport will serve as the primary hub with Liege as secondary. That mirrors the courier’s U.S. operations, with a main hub in Memphis, Tennessee, and a secondary hub in Indianapolis, said Dave Canavan, chief operating officer of FedEx Express Europe.
It also means the brunt of job cuts may fall on the Liege hub.
“We understand that while these intended changes are absolutely necessary to put us on the right path, our team members, particularly in Liege, will be concerned about the future,” Canavan said. “We will do everything we can to conduct these consultations constructively.”
(Updates with annual savings in second paragraph)
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