An executive at FedEx told a House subcommittee Wednesday that the company is considering a major reorganization that could be the first in decades to overhaul how it operates as a public company.
FedEx, the nation’s largest commercial airline, has been on a fast-track restructuring process that includes cutting costs and increasing staff.
The changes, which could include some of the biggest changes since it merged with UPS in 2000, could cost the company as much as $1 billion in lost revenue in 2019 and 2020, according to internal documents reviewed by The Huffington and CNBC.
A senior FedEx executive told the House Commerce Committee that the restructuring, if approved by the board, could begin this year.
The FedEx board, led by Chairman Robert McDowell, has held a series of meetings to discuss the proposed reorganization, according the documents.
McDowell, the vice chairman of the board of directors, did not immediately respond to a request for comment.
McDonald’s has been one of the most aggressive buyers of health care as it seeks to compete with health insurers in the high-cost and increasingly complex market for health care.
In a 2016 internal FedEx email, executives at the company’s Health Services division discussed how the company could increase its ability to provide “high-quality, high-quality care” to customers.
The email, which was not publicly available, included a quote from FedEx CEO Dan Cathy: “In many ways, FedEx is the healthiest company in the world.”
But it also warned that “it’s time for us to take a serious look at how we approach healthcare.”
The FedEx executive who spoke to the House committee, who has not been identified, said the company would begin “intensive restructuring” that could include reducing staff, moving some of its employees into other roles, and cutting down on the number of people delivering packages.
The proposed reorganizations, if finalized, could create one of FedEx’s largest regulatory headaches as the company tries to win approval for an unprecedented overhaul of its operations.
McDougall said FedEx was looking at the impact of some of these changes on its business.
“In the next five years, FedEx will have to decide whether to continue to be a health care company,” he said.
“At the same time, it will be important for FedEx to understand how we can best manage this transition.
We are focused on providing quality, affordable health care to our customers.
We will continue to work with regulators to ensure that FedEx continues to operate with the highest standards of safety and integrity,” he added.
Fedex has already been struggling with a record $1 trillion health bill.
The company, which has more than 50,000 employees, was ranked as the second-most expensive airline in the country in 2019.
McDougal said the cost of providing health care is growing quickly, and that FedEx will likely need to adjust to the changing landscape of the health care industry.
“There’s a lot of growth, a lot more competition, and we are going to have to do a lot in terms of our workforce,” he told CNBC.
“I don’t think that’s a fair picture to put in terms the cost.”
The cost of health insurance premiums is expected to continue rising in the next decade, and many experts expect the cost to grow by another $1,000 a year by 2025.
McDavid, who was vice chairman from 2001 to 2014, also said that FedEx is planning to invest billions of dollars to reduce costs.
“We’re going to be investing more than ever to improve our efficiency and our cost base,” he continued.