FedEx’s decision to spin off its LTL unit marks the end of an era that began nearly 30 years ago when major parcel carriers sought to provide comprehensive transportation solutions for their customers. This strategic shift reflects a changing landscape in the logistics industry and a return to core competencies for FedEx…
However, the landscape of the transportation industry has evolved significantly since those early acquisitions. The rise of e-commerce, changing customer expectations, and the increasing complexity of global supply chains have reshaped the market. Additionally, the LTL sector itself has become more competitive, with companies like Old Dominion Freight Line and XPO Logistics emerging as strong players focused solely on LTL operations.
FedEx’s decision to spin off its freight division follows a trend seen in the industry. In 2021, UPS sold its LTL business, UPS Freight, to TFI International for $800 million — a move that signaled a shift away from the integrated service model. Similarly, XPO Logistics has undergone its own transformation, spinning off its contract logistics business (now GXO Logistics) and its brokerage operations (now RXO) to focus primarily on LTL.
Are we sure this isn’t just more Welchian “high-grading”, progressively cutting whatever segment offers the lowest margin, thus increasing the average margin for the company, which is rewarded by the stock market?
Could be, but this isn’t a case where the freight business is disappearing. It is being sold to another company that specializes in that area. In general there seems to be a trend to de-conglomeratize.
Being sold, spun off, or shuttered, has the same net result for the mother ship: juiced margins and growth. Just like Kellogg spinning off it’s breakfast cereal division, and J&J spinning off it’s OTC products operations.
Are they now going to fly everything? If the ground package service continues filling LTL trucks with packages makes sense. The main difference is weight limits. LTL can ship a thousand lb pallet. Or a 55 gal drum weighing 500 lb. Wt limit for ground is usually 40 lb or so, what a person can lift.
True, which is why focused companies can have an advantage. My point was that the LTL business wasn’t going away (like, say, certain car models) but being sold to another company more focused that area.
