© Reuters. People pass a FedEx Office store in Toronto, Ontario, Canada, July 21, 2017. REUTERS/Chris Helgren
By Lisa Baertlein
LOS ANGELES (Reuters) – FedEx (NYSE:) on Tuesday said it will merge its contractor-based Ground delivery operations in Canada into its company-operated Express unit and convert contractors into employees.
The move, set to be phased in starting in April 2024, comes as the global delivery company is revamping its business to boost profits and better compete with rivals like United Parcel Service (NYSE:), Amazon.com (NASDAQ:) and regional delivery firms.
Combining the Canadian delivery operations would yield an annualized cost savings of more than $100 million upon completion in fiscal 2025, FedEx CEO Raj Subramaniam said on an earnings call with investors.
FedEx made a similar change in the U.S. states of Alaska and Hawaii last year.
Still, the company said there will be U.S. markets where packages shift from Express to Ground, its outsourced delivery arm. In those cases, the company said it would continue to use delivery contractors as part of its “hybrid” worker model.
Memphis, Tennessee-based FedEx in April said it planned to combine the two delivery units to reduce costs and streamline service. Rival UPS, known for tightly controlling expenses, operates just one delivery network.
FedEx’s effort to combine operations is part of a wider effort to slash $4 billion in costs by the end of its 2025 financial year. FedEx announced that cost-cutting plan in June 2022, about two weeks after activist investor D.E. Shaw won two additional board seats.
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