FedEx Freight, the regional less-than-truckload service of FedEx Corp., said Monday that it will cut its standard fuel surcharge by 25%, a move designed to boost revenue and ease volatility for customers as the weak housing and automotive markets slow the trucking business.
FedEx Freight President and Chief Executive Douglas G. Duncan said the company made the move as a response to customer feedback and as it works to improve its productivity, margins and fuel efficiency.
"We're in a position to do this, and it's the right thing to do to help our customers. And it gives us an advantage in the marketplace," Duncan said in an interview.
Less-than-truckload carriers consolidate freight for more than one customer in a single truck. FedEx Freight posted annual revenue of $4.5 billion in fiscal 2007, while FedEx Corp. posted $35.2 billion.
FedEx National LTL, the company's long-haul less-than-truckload unit, also will reduce its fuel surcharge to the same levels as FedEx Freight.
While the move involves FedEx Freight assuming more of the fuel cost, the hope is that additional volume will make up for "a great deal of that," Duncan said.
Duncan said the price cut is effective starting with Monday's shipments. He said FedEx Freight has been looking at cutting the fuel surcharge "for some time."
FedEx Freight and FedEx National update fuel surcharges weekly based on prices published by the U.S. Department of Energy.
Duncan said the idea is to ease the cost uncertainty for shippers who are dealing with ups and downs in fuel prices.
A spokesman for competitor United Parcel Service Inc., which also has less-than-truckload services, said the company had "nothing to say at this point" about the FedEx cut.
Duncan said he didn't know how competitors, which also include Con-way Inc. and YRC Worldwide Inc., would respond.
He said that while the weak housing market and a slowdown in the automotive industry have affected the trucking business, the company still predicts an uptick later this year.
"The broader economy still continues to be pretty solid," Duncan said.
FedEx shares were up 29 cents at $115.96 in recent trading.