Upbeat FedEx easing austerity; retirement matches, merit pay returning

Citing modest improvement in the economy, growing shipping volumes and generally healthier business, FedEx officials said they'll restore half the company's match of 401(k) retirement fund contributions for most employees.

Performance-based merit increases averaging up to 2 percent will be brought back. Operating companies including FedEx Express, FedEx Ground and FedEx Freight have been cleared to reinstate merit raises in calendar 2010 compensation programs and schedules.

Among the cost controls still in place are a hiring freeze and permanent pay cuts of 5 percent for salaried exempt employees, more for higher executives, that were announced last December as part of an $800 million belt-tightening.

The 401(k) match will be restored to 50 percent of earlier rates except for FedEx Office, where the match will be 100 percent because the company doesn't have a company-funded pension plan.

Chairman, president and CEO Frederick W. Smith announced the moves Tuesday in an e-mail to FedEx employees, who number more than 275,000 worldwide and 33,000 in the Memphis area.

"We are announcing these changes now because we are seeing a modest improvement in the economy," the e-mail said. "Our volumes are growing and our business is becoming healthier. While the pace and duration of the recovery is still uncertain, at this point in time, we are encouraged by the trends we see and with our performance."

"It is good news," FedEx spokeswoman Sandra Munoz said Wednesday. "Obviously we are seeing slight improvements in the economy as well as modest improvement in our volume growth. This keeps with our people-first philosophy, our culture here. We wanted to at least start resuming some of these programs. ...

"Our team members have sacrificed so much in the last year. Although it's not at the full level, our company wants to recognize and let our employees know they're important to us."

Positive signs include a forecast that daily volume will hit a 2009 peak of 13 million packages Dec. 14, up from 12 million last Dec. 15. Quarterly earnings for the June-August first quarter came in higher than expected.

The announcement bodes well for second-quarter earnings due out Dec. 17, said analyst Helane Becker with Jesup & Lamont Securities.

FedEx earnings guidance for the September-November quarter is 65 to 95 cents a share, well below the $1.58 a diluted share a year ago.

Analysts surveyed by ThomsonOne Analytics are projecting second-quarter earnings of 84 cents a share.

-- Wayne Risher: 529-2874

2 cost-cutting moves will end Jan. 1

Citing modest recovery and improving business, company will lift year-old cost-saving measures Jan. 1:

Restoring 50 percent of company match of employee 401(k) contributions (100 percent at FedEx Office)

Reinstating merit raises, allowing operating companies to build performance-based pay raises into 2010 compensation programs and schedules

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