XPO Logistics makes cuts on LTL side as part of plan to increase synergies, increase profitability

Third-party logistics and freight transportation services provider XPO Logistics said late last week that it has commenced a workforce reduction for its less-than-truckload (LTL) unit, which it acquired from Con-way, when XPO acquired Con-way last year.

This move is part of XPO’s previously-stated plan for synergies in its LTL business, with the company saying it has eliminated roughly 160 non-sales positions that were primarily in administrative, management and back office functions, and impacted less than 1 percent of XPO’s LTL North American headcount. XPO said an additional 30 positions were eliminated in other parts of the company, primarily to address redundancies created by the acquisition.

XPO said these efforts will cut annual costs by more than $20 million against a targeted operating profit improvement of $170 million-to-$210 million over two years, adding that to date around $50 million of expected annualized savings have been achieved since XPO officially acquired Con-way on October 30.

In an interview with LM, XPO Chairman and CEO Brad Jacobs said that these moves were a planned reduction that is part of the company’s larger strategy for LTL, which it had intended to do since the Con -way transaction was closed.

“We want our LTL business to be a more leaner, results-oriented, with less waste and more productivity,” said Jacobs. “We had a goal of $170 million-to-$210 million over two years and in three months we have already moved more than $50 million towards that goal, which includes $20 million from these actions and over $30 million from steps we took in the fourth quarter. Our plan is very much on track, and the integration is off to a strong start.”

XPO has a dual organization structure for its LTL operations that Jacobs said is based on clearly delineated P&L responsibilities, coupled with a new mobile technology it is in the process of rolling out, with all if its service branches going live with it by March 31.

And he explained that with the recent appointment of Tony Brooks as LTL president, coupled with high company morale, things are going according to plan for the LTL operations. Brooks joined XPO in November and has been in the transportation and logistics sectors for 30 years, with significant experience running three of the largest North American fleets, including Sysco Corporation, Dean Foods, Sears Holdings Corporation, PepsiCo/Frito-Lay, and 11 years with LTL long-haul carrier Roadway Express, Inc. 

When asked about the current state of the LTL market, Jacobs described it as stable, with the same market trends that have been intact for the last year or so still there. These things include sluggish volumes and tonnage down a little bit, while pricing remains strong.

“The reason that pricing is strong is that unlike full truckload, LTL has a very consolidated carrier base and the top handful of carriers control about [75 percent] of the capacity and every single one of those players is playing very rationally right now,” he said.

In assessing the current state of the economy, Jacobs said that the consumer side is outpacing the industrial side, which is slowing but still not as bad as perceived, given recent declines in the ISM’s monthly manufacturing index.

“All of the customers I talk to feel that business is up this year but not by much,” he said. “The economy does not feel as bad as the headlines. Generally speaking, there is not a lot of gloom and doom. Our largest end market is retail, including auto, furniture, and home appliances, and electronics, which has been especially beneficial for our last mile business, which is tied to strong e-commerce trends and people buying more items online. All the segments we are serving are seeing or expecting some level of growth. And in Europe demand is up, too, especially in Spain, with things being a little earlier in the cycle in Europe.”