Jacobs talks about next steps for Con-way XPO Logistics Chairman and CEO Jacobs talks about next steps for Con-way acquisition and integration
With the ink now dry from XPO Logistics’ acquisition of Con-way Inc. now dry, the company’s plan for how it plans to integrate Con-way into its plans is coming into fuller focus.
By Jeff Berman, Group News Editor
November 05, 2015
With the ink now dry from XPO Logistics’ acquisition of Con-way Inc., the company’s plan for how it plans to integrate Con-way into its plans is coming into fuller focus.
Yesterday, XPO reported solid third quarter earnings (as reported in our news section here), and soon after I had the opportunity to speak with XPO Chairman and CEO Brad Jacobs about some of the company’s plans for Con-way, or, XPO’s newest addition, to be precise.
One of the first things he discussed was the announcement of Tony Brooks as president of its LTL business, effective November 11. XPO heralded Brooks’ extensive industry background and given his myriad experience it would not make sense not to, it seems. Brooks 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.
Jacobs said that Brooks’ vast experience makes him one of the best transportation operators in the country and makes him a major addition to XPO’s LTL operations.
At XPO LTL, Jacobs said the company has already taken out more than $30 million in annualized costs primarily through headcount reduction in the form of 250 layoffs, as well as adjustments in vendor contracts, too. That helps XPO to chip away at its announced goal of increasing Con-way’s annual operating profit by $170 million to $210 million over the next two years through synergies and operational improvements, as well as remaining asset-light with a net capex of 3.3 percent of revenue while increasing ground transportation capacity.
Like in previous interviews, Jacobs make it clear that Con-way Freight is a market leader, touting how it is the leader in next-day and two-day lanes in LTL and covers 98 percent of U.S. zip codes.
“Our customer satisfaction scores are extremely high for reliability and low amount of damages and what we are now going to do is we are going to introduce an economy service for longer lengths of haul, which will take some time to do, and it is very exciting as it is a very large market that Con-way was not aggressively going after,” he said. “All in all, I am more bullish now about the Con-way transaction than when it was first announced in September.”
In terms of the plans for the economy service, Jacobs said it will take up to two years for it to be up and running, explaining that XPO will not need to change its terminal network inherited through the acquisition. But he said that XPO will need to have technology development to support it for handhelds for drivers and also for billing and also for rolling out all its route optimization software applications.
“There is planning and engineering required to do that and it is not something we can do overnight. It is a long-term project that is very exciting,” he noted.
In the short-term, Jacobs said XPO is focused on cost-reduction for overhead, particularly in the back office, and capitalizing on its larger size in order to “headlight” purchasing for a number of categories of purchasing that require a significant amount of money. This is for things like trucks, trailers, fuel, tires, office supplies, temporary labor, warehouse equipment, IT services and hardware and software as well. These are purchasing categories for what was a $15B global organization with Con-way where as a high level purchaser of those categories of spend, explained Jacobs, adding that they deserve attention on lower prices and with such a high spend, a few percent off adds up to a lot of savings.
With a lot of discussion on Wall Street about how the industrial economy is trending downward and specifically having the impact to dint LTL growth, I asked Jacobs about how this is impacting LTL pricing.
“I think LTL is still strong overall and in the case of Con-way Freight pricing was up more than 4 percent in the quarter and contracts that are being signed in the last month have been executed at between 3-6 percent increases,” he said. “Pricing in LTL is strong.”
No conversation with Jacobs would be complete without getting a fresh take on XPO’s acquisition strategy.
While growth through acquisition, is still a major initiative, with Jacobs saying XPO will continue to significantly grow the company through acquisition long term, the short-term is a bit different in that for the next year or so, it will not be focusing on acquisitions and will instead put its immediate attention towards optimizing the $15 billion it now controls through the Con-way acquisition, coupled becoming more profitable and bringing its customer service to even higher levels.
Another area it will concentrate on is cross-selling the different services XPO has to the customers it have great relationships with.
“We have more than 50,000 customers and 84,000 employees, and the opportunities to serve those customers more comprehensively and to run the business more efficiently is a significant one and that is where our focus is––on driving synergies and efficiencies from the large business that XPO has become,” he said.
XPO Logistics continues to grow at what could be described as an unprecedented pace, and Brad Jacobs and his team continue to take steps to increase market share and gain footholds in markets it was not a player in even a short time ago.
https://www.logisticsmgmt.com/article/xpo_logistics_chairman_and_ceo_jacobs_talks_about_next_steps_for_con_way_ac