FedEx Corp. named Raj Subramaniam as its new chief executive officer, taking the reins of the package-shipping company from the man who pioneered express delivery almost 50 years ago.
Subramaniam, 56, who is currently president, will move into the new position on June 1, FedEx said Monday. He takes over from the company’s legendary founder Fred Smith, who will become executive chairman.
Subramaniam’s promotion was long expected. Less than a month ago, the company named Smith’s son, Richard W. Smith, as the next head of its express division. The 77-year-old founder has been saying for at least two years that he’s nearing the end of his long tenure.
The elder Smith has been in the midst of a campaign to overhaul the company, which began operations in 1973, and its top management to stem declining profit margins. Recent changes, such as moving to seven-day service and focusing on small businesses, are designed to help FedEx cope with commercial deliveries dwindling as a percentage of sales because of faster-growing e-commerce packages.
“I have a great sense of satisfaction that a leader of the caliber of Raj Subramaniam will take FedEx into a very successful future,” Smith said in a statement. “I look forward to focusing on board governance as well as issues of global importance, including sustainability, innovation and public policy.”
Subramaniam, who joined FedEx in 1991, had been chief operating officer since 2019, marking a rapid rise through FedEx ranks. His pathway to the top was smoothed out after Smith’s son was named chief of the company’s Express unit beginning on September 1. As chief of the FedEx’s largest unit by sales, Smith, 44, may be in line to eventually succeed Subramaniam as CEO.
FedEx jumped as much as 3.9% to $ 239.12 in the postmarket trading before paring its gain. The stock is down 11% this year through Monday’s close.
Subramaniam will be under pressure from shareholders to reduce costs, including combining the company’s separate Express and Ground networks, and to lower capital expenditures, especially for large aircraft, said Satish Jindel, founder of ShipMatrix, a provider of data and parcel consulting services. In just the last year, the company has increased the use of the Ground network to deliver more Express packages.
“He needs to speed up the integration of Express and Ground,” Jindel said in a telephone interview. “The other challenge is cutting back on capex. They still spend a lot of money on airplanes and if they integrate the two networks, they will need fewer airplanes and smaller ones. ”
In his 30-plus years with FedEx, Subramaniam has held a variety of positions. He was named chief of marketing and communications in 2017 and took over FedEx’s Express unit two years later. Less than two months on the job at Express, the company appointed Subramaniam as chief operating officer after the abrupt departure of then-COO David Bronczek. Subramaniam also had served as chief of FedEx Express in Canada and in other roles throughout Asia and the US
In a letter to employees, Smith lauded his successor as a “brilliant and humble man,” a team player and a person of “impeccable integrity.” The founder said he recommended Subramaniam to take over as CEO-elect at a board meeting last week, citing the upcoming 50th anniversary of operations as part of the rationale timing.
What Bloomberg Intelligence Says:
“Subramaniam will provide consistency but has its work cut out to improve Ground margin and generate benefits from the TNT acquisition in Europe. This also ends any confusion about leadership after Richard Smith was appointed CEO of the Express earlier this month. ”
– Lee Klaskow, BI transportation and logistics senior industry analyst
Click here to read the research.
FedEx was founded in 1971, but didn’t start delivering packages until two years later. Smith sunk his family fortune into the creation of the overnight courier, which grew from delivering just 186 packages on its first day into a top global shipping giant alongside United Parcel Service Inc. and Deutsche Post AG’s DHL.
The company expanded rapidly, adding its Ground and Freight operations in a 1998 acquisition. Last year, FedEx had annual sales of $ 84 billion, and analysts expect revenue to increase to $ 94 billion in the fiscal year ending in May. UPS is still higher with revenue of $ 97 billion in 2021.
Subramaniam said he will keep the company’s current strategy intact when he takes over from Smith.
“It is my honor and privilege to step into this role and build upon what he has created,” the soon-to-be CEO said in a statement.
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