FedEx shakes Wall Street with surprise exit from Deputy General Manager


FedEx Corp. walked through Wall Street for a loop, announcing the resignation of Fred Smith's senior assistant only weeks after joining the company's board of directors.

Raj Subramaniam will take up his duties as president and chief operating officer on March 1, replacing David Bronczek, said Thursday the giant of shipping. Bronczek, 64, made a "personal decision" to retire, the company said. He had been with FedEx since 1976 and had held several management positions.

The sudden departure – and Smith's moderate departure – immediately made waves on Wall Street. Bronczek had just been appointed to the board of directors on January 28, a month after the promotion of Subramaniam, 52, to head FedEx Express, the company's largest business unit. The latest move put Subramaniam in the foreground, 74-year-old Smith's heir apparent, as FedEx struggled against a slowdown in international markets and a declining stock price.

"Something has come up in the last two weeks to bring about this change. There is no other way than this to happen, "said Satish Jindel, founder of SJ Consulting Group. "It does not seem normal. You name no one on the board, and then in two weeks you say that he is retiring. "

The company refused to explain the reasons for Bronczek's departure.

Shares fell 3.4% to 177.65 USD at 12:19. Friday in New York. FedEx has dropped 24% in the last 12 months up to Thursday, compared to a 4.9% gain for its competitor United Parcel Service Inc.

"We recognize Dave for his years of service at FedEx. FedEx has many talents and I am confident that the transition will be seamless, "Smith said in his release. "Raj has significant experience in many areas of our portfolio, which will be vital to enter this position."

Bronczek's decision to retire did not result in any disagreement with FedEx on matters relating to operations, policies or practices, the company said in a regulatory document. He will leave February 28 as part of a five-year deal not to work for FedEx competitors such as UPS, Deutsche Post's DHL Group or FedEx will pay Bronczek $ 2.5 million in cash by the end of March.

Another FedEx veteran, David Cunningham, was released in December. Shortly after his resignation, the company surprised analysts by reducing its prospects and announcing a buyback program by employees. FedEx also announced that it will reduce its expenses through the reduction of its operations abroad to meet the falling demand.

"The growing interest in integrating TNT by FedEx, executive departures and increased competition from are fundamentally unjustified, in our view. All the worries about XPO's loss of important customers (we think it's Amazon) are misplaced, and the new COO is expected to become the next CEO, said transportation analyst Lee Klaskow. Global at Bloomberg Intelligence.

This weakness was linked to the difficulties encountered in Europe and the integration of TNT Express, a Dutch courier service bought by FedEx in 2016 for 4.8 billion dollars. Bronczek and Cunningham were both involved in the mesh of operations, an effort that was interrupted by a cyberattack at TNT that prompted customers to leave.

"My feeling is that the integration is not going well," said Kevin Sterling, an analyst at Seaport Global Holdings. Europe has generally been weak for shipping companies recently, he said. "I think it was more difficult than they would have negotiated."

According to Fed Paterson, an analyst at Loop Capital, two major shifts in just a few months in a few months are unusual for FedEx. Under Smith's leadership, FedEx enjoys a stable management reputation, with leaders accumulating decades of experience as they climb the ranks.

"We received announcements very quickly, more than we had expected from FedEx in the past," said Paterson. "But when you look at them in isolation, they were logical."

Trip Miller, Managing Partner of Gullane Capital Partners, an investor at FedEx, said he would like the company to explain what is behind the latest changes.

"It makes me scratch my head a bit and it's good, it's two key leaders who leave in about three months. What is going on? "Said Miller.

Subramaniam had a quarter century of experience at FedEx when he was promoted in December to head the Air Freight Express unit. Previously, he was Director of Marketing and Communications and held several positions in Marketing.

Although he has been participating in conference calls with analysts since 2017, he is not as well known as other FedEx executives. And Subramaniam will have a full plate with the latest promotion. He will continue to serve as President and CEO of FedEx Express and share these titles within FedEx Services.

Despite gaining a solid reputation in the company and gaining Smith's trust, this large portfolio may be too much for a person who has not yet run a large business unit, said consultant Jindel.

"He was going to lead FedEx Express, a global company, and received it just at the end of December. And after six weeks, he is responsible for all this and FedEx Corp. Said Jindel. "It's just not enough time for him. It just shows that it was not planned. It is likely that FedEx will appoint someone this year to take over the Express unit, he said.

Source link