UPS, Fedex Applaud Tax Cuts
“UPS strongly believes the lower corporate tax rate will expand US GDP, which increases our customers’ businesses activities,” said David Abney, UPS Chairman and CEO. “This economic growth will raise demand for UPS services and we look forward to helping our customers take full advantage of this opportunity.”
Executives at Fedex have already calculated the dollar benefits of the cuts to the corporate tax rate, saying it would amount to a $1.3 billion increase in annual profits.
“We’re encouraged by the Tax Cuts and Jobs Act,” said Frederick Smith, the chairman of FedEx, in an earnings call with analysts and journalists. “This legislation offers pro-growth, pro-business tax reform solutions that will power the economy.”
Abney noted that UPS is in the process of a multi-year capital investment program to increase capacity and enhance operating efficiency. “With the additional resources from tax reform,” he said, “UPS will expand and accelerate investments in our people, technology, transportation fleets, facilities and value-generating customer services, which will further stimulate job creation. Tax savings, combined with UPS’s strong return on invested capital will result in additional value for UPS customers, shareowners, and employees.”
The legislation cuts the nominal corporate tax rate from 35 percent to 21 percent.
“US GDP could increase materially next year as a result of US tax reform,” said Fedex chief financial officer Alan Graf during the conference call. “If this occurs, we would likely increase capital expenditures and hiring to accommodate the additional volumes triggered from this incremental GDP growth.”
Graf added that Fedex’s original capital spending of $5.9 billion in 2018 could increase now that the tax bill has been enacted.
Senator Elizabeth Warren, a Democrat of Massachusetts, blasted the two companies, saying they are
already sitting billions of dollars in cash, receive millions in tax subsidies in states like Illinois, Indiana, and Tennessee, and are investing millions in technologies to reduce their employment levels.
“Giant corporations like UPS and FedEx have billions of dollars in cash on hand that they could already be using to increase wages or hire more workers,” Warren said in a statement to the website TYT. “If they aren’t using this money to improve the lives of Americans now, there is no reason to believe they’ll do otherwise with the windfall they’ll get” from the GOP tax measure.
TYT reported on patent applications for package-handling automation, delivery drones, and driverless-trucking systems. The two companies also reportedly plan to transform full-time driving jobs into Uber-like delivery work.