Business succession plans can be complex creatures. At FedEx Corp., a $90 billion company run by its founder for 51 years, that’s even truer.

But the time for succession could soon strike, according to a prominent consultant who has a long history with FedEx. By the end of 2022, and possibly as early as its June 28-29 investor and analyst meeting, the Memphis, Tennessee-based giant (NYSE: FDX) could announce that founder, chairman and CEO Frederick W. Smith (pictured left) will step down as CEO to become executive chairman, a new position. If that happens, Raj Subramaniam, FedEx president and chief operating officer (right), would assume the role of CEO and retain the chairmanship. Richard F. Smith, the eldest of the founder’s children, would be groomed to become the next COO once Subramaniam, 54, takes over as CEO.

Young Smith, 44, was named earlier this month to become president of FedEx Express, the company‘s airline and international unit, the parent company’s largest operation. Smith, currently regional president of FedEx Express for the Americas and executive vice president of global support, becomes acting president of the unit on April 1. He officially takes over on September 1. Donald F. Colleran, the current head of the unit, will remain at the end of the year in an advisory role, when he will retire.

Succession plan details are predictions by Satish Jindel, whose company, SJ Consulting, has worked with FedEx for 25 years and, among other things, advised FedEx on its 1998 acquisition of LTL and small package carrier Caliber System. Inc., a move that put FedEx in the U.S. ground parcel business. Jindel was so confident in his predictions that he agreed to record them.

The elder Smith, who turns 78 in August, will still be involved in major decisions affecting FedEx, Jindel said. Upon becoming executive chairman, Smith would continue to oversee the activities of FedEx’s board of directors while retaining powerful strategic influence. By contrast, choosing to remain solely as chairman would effectively remove Smith from any deeper involvement beyond running FedEx’s board of directors, Jindel said.

Such an evolving role for a corporate patriarch is not unprecedented. As executive chairman of trucking giant Knight-Swift Transportation Holdings Inc. (NYSE: KNX), Kevin P. Knight guided the company into the LTL industry last year through the acquisitions of AAA Cooper and Midwest Motor Express. More than a year ago, Jeff Bezos stepped down as CEO of Amazon.com Inc. (NASDAQ: AMZN) to assume the new position of Executive Chairman. Although his successor, Andy Jassy, ​​runs the day-to-day operations of Amazon, the idea of ​​Bezos splitting entirely from the company he founded was far-fetched.

Smith separated from the day-to-day operations of FedEx for several years. In 2016, he stepped down as chairman in favor of David J. Bronczek, who was also COO at the time. After Bronczek, widely considered Smith’s heir apparent for all major roles except the presidency, abruptly retired in early 2019, Subramaniam, another Smith protege, took on the roles of chairman. and chief operating officer.

Smith, a long-time presence on FedEx’s quarterly analyst calls, typically avoids the event these days. He participated in FedEx’s second quarter fiscal 2022 phone call to answer questions specifically directed to him. Otherwise, the calls were led by Subramaniam, Brie Carere, executive vice president and chief marketing and communications officer, and Michael Lenz, chief financial officer.

Despite his removal from the public eye, Smith remains an unstoppable force at FedEx. At the end of 2021, he owned more than 20 million shares, according to a Securities and Exchange Commission filing. He controls about 7.9% of FedEx stock, making him the largest individual shareholder in the company.

Smith cemented his leadership position for life in January 2019 when FedEx announced that its mandatory retirement policy at age 75 would only apply to non-executive directors. Smith was, and remains with Subramaniam, the sole official of FedEx’s board of directors.

Few, if any, leaders in the past 50 years have matched Smith’s legacy of success and perseverance. Since its incorporation in 1971 and its operational launch two years later, FedEx and Smith have been one. It would be hard to find a CEO who has remained so active in a company after more than five decades.

Even though FedEx is a public company whose senior management is accountable to its board of directors, Smith’s rule is still in effect. As Jindel said, “If the big boss wants to make a change, he makes a change.” A key personnel step like the promotion of Richard Smith, although announced by Subramaniam to ward off any questions about nepotism, had to be approved by the elder Smith, Jindel said. Young Smith joined FedEx in 2005 and has held various senior positions since then.

It’s that iron grip that Jindel said he hopes Subramanian and young Smith will try to loosen. FedEx has operated under the mantra that its business units must “compete collectively and operate independently.” The result was a siled business that wasn’t always the model for operational efficiency. In contrast, FedEx’s big rival, UPS Inc., (NYSE: UPS) is the prototype of the integrated delivery model; usually a single driver picks up and delivers all letter and parcel shipments, regardless of product line.

The business pivoted under the leadership of Subramaniam. In the first three quarters of its fiscal year 2022, which ends May 31, trucks operated by FedEx Freight, the company’s LTL unit, traveled more than 7 million miles on behalf of the delivery unit of FedEx Ground parcels, Subramaniam said last week on The FedEx Analysts Final Call. The LTL operation has supplied FedEx Ground with intermodal containers, which have already been shipped more than 36,000 times, he said.

In what might be the most significant development of all, FedEx has expanded a program to route FedEx Express backordered shipments directly to FedEx Ground facilities for transportation. FedEx Express, the company’s air and international unit, handles large volumes of two- and three-day deliveries that never see the inside of an airplane. Pushing more of that business to a lower-cost alternative like FedEx Ground could add billions of dollars to FedEx’s bottom line, Jindel said. A full integration of the company’s express and ground units “would make the company $400 to $500 a share,” Jindel said. FedEx shares closed Thursday at $225 per share.

Subramaniam, a marketer who carefully weighs his public words, subtly changed the lingo. “We will continue to thoroughly review all of our assets and our network to put the right package in the right network and [at] the right cost to serve,” he said on the call.

The other issue is FedEx Ground. Fedex spent its first 25 years as an air carrier, and aviation remains central to its culture decades after its expansion into ground deliveries. The company operates 690 aircraft at a network of 680 airports worldwide. No other air cargo carrier matches FedEx’s size or prowess. However, the massive shift in the United States towards business-to-consumer (B2C) deliveries, and away from the business-to-business (B2B) segment that is FedEx’s bread and butter, has prompted the company to dedicate more resources at FedEx Ground. .

The last nine years have been a tough race on the baseline. According to Deutsche Bank estimates, FedEx Ground’s profits since 2013 have increased by $400 million on revenues of $17 billion over that period. This implies a contribution margin of only 2.5% of the ground unit over this period, the bank said.

Over the past two to three quarters, FedEx Ground has been plagued by labor shortages that have driven up transportation and warehousing costs and resulted in unacceptable operational inefficiencies. On the latest analyst call, executives said the unit’s personnel issues were behind it all. However, they acknowledged that the unit would not achieve double-digit operating margins in the second half of the fiscal year. In contrast, UPS’s operating margins at its primary ground parcel delivery unit are approximately 12%.

An industry executive familiar with FedEx’s business questioned the fervor of the company’s commitment to ground operations. “A lot of these are low-margin e-commerce products aimed at residences,” the executive said. “You have to wonder if (FedEx) really cares if it happens in one day, two days or three days.”

If that is indeed the mindset, it is a larger question of whether the company has become too insular in its executive thinking. FedEx used to bring in foreigners to fill leadership positions, according to Jindel. That doesn’t happen as much anymore, with most executives being local and hiring coming from within, he said.

Unlike UPS, which is run by an 11-person executive committee and whose CEO, Carol B. Tomé, is not an insider, the FedEx business is still very much controlled by one person who is the ultimate insider. “You’ll never see a FedEx CEO hired from outside like UPS did with Carol Tomé,” Jindel said. “But the company would certainly benefit from outsiders’ perspectives.”

the FREIGHTWAVES TOP 500 The list of for-hire carriers includes fedex (#1), UPS (#2), Knight-Swift Transportation (#3) and Midwest Motor Express (#206).