UPDATE: May 5, 2023: XPO's cost reduction actions have already been taken, and the company expects to see the full run rate benefit of the more than $50 million in annualized labor-related cost savings in Q3, a spokesperson said in an email. Additional workforce reductions this year will come primarily through attrition.
- XPO is planning more than $50 million in annual headcount reduction savings beginning in Q3, more than two-thirds within its core LTL business, Chief Strategy Officer Ali Faghri said on an earnings call Thursday.
- The company reduced headcount by 1% in Q1 compared to Q4 2022, and cuts will accelerate through the rest of the year, he said. An XPO spokesperson declined a Transport Dive request for the exact number of job cuts or types of positions being eliminated but said some of the savings will be reinvested in the business.
- “You should see a bigger step down in the second quarter in headcount,” Faghri said. “And then we should see further reductions in headcount in the second half of the year.”
As some competitors reported double-digit volume declines at the end of a challenging Q1, XPO managed to limit its daily LTL tonnage drop to only 1.8% YoY, with daily shipments up 1.5%.
Faghri, a Wall Street analyst hired in January, said the layoffs will affect the company’s LTL, Europe and corporate units.
“Even beyond that, we see further opportunities to reduce costs in LTL while continuing to invest in the network,” he said.
The Greenwich, Connecticut-based LTL carrier is far from the only one cutting back in a tough freight environment.
FedEx Freight cited lagging demand in announcing plans this week to close 29 locations and execute yet another round of furloughs, and plenty of other carriers’ executives acknowledged to investors on earnings calls over the past few weeks they don’t expect demand to pick up in the near term.
Non-union XPO had already adjusted its workforce’s hours to align staffing with lower volumes in recent quarters. The carrier furloughed drivers and dockworkers over the holidays.
The company’s employee salaries, wages and benefits costs increased by 6.7% YoY in Q1 following raises last year, and the carrier changed its employee compensation plans in early 2022 to tie pay to service quality in addition to profits, executives said on the call.
While some of the cuts will come from the company’s corporate offices, the reductions are occurring as XPO invests in its leadership. After hiring Faghri, the carrier added a pair of former Old Dominion Freight Line heavyweights to its board and C-suite, respectively, last quarter.
“I want to thank our thousands of dedicated employees for helping XPO be world class in every aspect of our business,” CEO Mario Harik said on the call. “Our people, at every level, are our great differentiator.”
Editor's note: This story was updated to clarify XPO plans to reinvest some savings into its LTL operation.