The Supply Chain Matters blog highlights breaking news developments involving FedEx and EV start-up manufacturing provider Rivian Automotive.
FedEx to Trim Management Ranks
In the throws of reporting two consecutive quarters of declining package volumes and subsequent significant cost reductions, the global parcel and supply chain services provider announced today that the carrier is reducing more than 10 percent of its existing management ranks.
According to reporting by The Wall Street Journal (Paid subscription required), CEO Raj Subramanium in email to existing management staff indicated that the carrier would reduce the size of its officer and director ranks while consolidating teams and functions. This report indicates that the company declined to disclose how many positions that would be eliminated in the move. The communication reportedly indicated that this was a necessary action in becoming a more efficient organization.
In September of 2022, FedEx shocked investors with disappointing financial and operating performance along with subsequent announcements of select office closing, a corporate hiring freeze and suspensions of weekend delivery services. In reporting quarterly financial performance in December 2022 amid muted demand levels, the carrier announced an incremental $1 billion in cost savings initiatives beyond its September forecast, with a goal to generate total fiscal 2023 cost savings of approximately $3.7 billion relative to its initial 2023 business plan.
The Journal report points to ongoing criticism from some analysts relative to overlapping functions among several of the company’s major business units along with ongoing pressure from activist investor D.E. Shaw Group.
This development further comes after rival UPS’s report of Q4, and full year 2022 financial performance was impacted by package volume declines and a Q4 revenue shortfall, amid higher parcel rates in the holiday quarter. UPS’s outlook for 2023 was an overall reduction in total revenue performance that that of 2022.
Rivian Automotive Initiates Added Layoffs
Reuters in an exclusive report is indicating that EV automotive and parcel van start-up Rivian Automotive’s CEO communicated to employees the need for trimming the company workforce by 6 percent in order to conserve cash. Reportedly, these layoffs are not expected to impact existing production workers at Rivian’s Normal Illinois factory facility. The start-up reportedly employs upwards of 14,000 workers.
This move is attributed to recent EV vehicle price cuts initiated by both Ford Motor and Tesla concerning popular existing EV models including the Ford Mustang Mach E EV and the Tesla Model Three. Reuters indicates that since these moves, Rivian, Lucid Group and British startup Arrival have announced headcount reductions, with Arrival’s cuts amounting to half of its existing workforce.
Rivian has an existing contract to supply EV delivery vans to Amazon, while Arrival has a contract to deliver EV vans to UPS.
The decision was reportedly communicated in an email to employees by CEO RJ Scaringe, who indicated in the communication that improving the company’s operating efficiency must be a “core objective.”
Our Supply Chain Matters commentary published on January 18 focused on the EV start-up falling short of 2022 production commitments and of added executive turnover. Rivian CEO RJ Scaringe in a January email to employees reportedly indicated that more than 700 vehicles were awaiting parts or work to be completed at year-end.
Following the Tesla playbook, Rivian had initially prioritized market growth over profitability, hence the emphasis on meeting production output milestones to generate cash. Now it would appear that the company is under pressure for shorter term profitability amid continued supply chain and manufacturing related challenges.
Rivian is scheduled to report Q4 and full year financial performance on February 28th.
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