Jane's++Page

This is for Jane's references and contributions.

FedEx Paper. As China grows, it needs to build an effective export and import infrastructure in order to keep up with growing international demands (Frankel). Logistics, from the roads and ports and airports to the warehouses and distribution centers, needs to be able to expand its reach to every corner of the country (Frankel). The expansion of a viable logistics system has kept pace with China’s overall growth (Frankel), giving it the power it needs to become a major world player. An important point to consider is how long China will keep its reputation as a source of good, low-cost labor (Frankel). Once the general working population in China increases in sophistication and education, and as China becomes increasingly world-wise, labor prices may begin to rise, decreasing some of the massive growth in exports (Frankel). At this time, due to the fragmented and somewhat challenging logistics environment within China (Frankel), few internal competitors are likely to come into play against either FedEx or UPS. UPS learned, much to their dismay, that receiving approval from the central Chinese government simply means that they are cleared to fight for local approvals (Brewster). For either company, as with Chinese companies, challenges with the transportation, fuel, and supply chain costs may cause an erosion of profits (Brewster). UPS had 4,000 employees in China in 2006 (Brewster). China has cultural differences among regions. For example, in the southern part of China, customers tend to be very open to discussion and cooperation, whereas in the Shanghai area, customers tend to be considerably more demanding (Brewster). Hong Kong is UPS’s most mature market in China, and customers have become very sophisticated (Brewster).

FedEx 2009 Annual Report notes: They opened up a new hub in Guangzhou during 2009 (FedEx 2009 AR). Operating revenues dropped in 2008 partially as a result of costs relating to the expansion of domestic services in China (FedEx 2009 AR). Additionally, in the same year, expenses relating to a Chinese joint Express venture also hurt net income (FedEx 2009 AR). The reorganization that this prompted negatively affected FedEx’s 2008 tax rate as well (FedEx 2009 AR). FedEx purchased a Chinese company, Tianjin Datian W. Group Co., Ltd, in March 2007 for $427 million (FedEx 2009 AR). Part of the purchase came from a $1 billion bond issue (ibid.). $348 of the total purchase price was allocated to goodwill (ibid). For FedEx, the Asia-to-US market reaches its highest point during October through November (FedEX 2009 AR). From UPS 2008 annual report: UPS opened a new hub in Shanghai and began working on another in Shenzhen (UPS 2008 AR). Shanghai is the first air hub in China constructed by an outside company (ibid.). This hub serves as a focal point for all Chinese locations to link to the overall UPS global network (UPS 2008 AR), strengthening the reach of UPS into China. It is located in Pudong International Airport and can handle sorting volumes of 17,000 packages per hour (ibid). UPS partners with a Chinese cargo airline, Yangtze River Express, to further connect the Shanghi port to the rest of China (UPS 2008 AR). The Shenzhen hub, which will be ready this year and can handle up to 18,000 packages per hour, will replace the primary transit location formerly located in the Philippines (UPS 2008 AR). UPS’s sponsorship of the Beijing Olympics improved their relationships with China considerably, bringing brand recognition to a much wider base of Chinese citizens (UPS 2008 AR). 19 million items were shipped via the efforts of thousands of employees (ibid.). UPS serves more than 40 Asian countries and territories (UPS 2008 AR). Additional daily flights were added in four Chinese cities during 2008 (UPS 2008 AR). Direct air service is now available between Shanghai and Cologne, Germany (ibid.). UPS feels that Asia, along with Europe, represents the most significant areas of growth for the company (UPS 2008 AR). The UPS model handles all aspects of logistics service through their pickup and delivery system (UPS 2008 AR). FedEx has more problems with its debt ratings than UPS (FedEx and UPS 2009/2008 ARs). FedEx was downgraded by Moody’s, while UPS retains its good standing (ibid.). UPS has a sustainability website that could have China implications – [|www.sustainability.ups.com]. UPS has become the first wholly-owned foreign express carrier in the country of China over the last five years (UPS 2008 AR). For UPS, Asian exports (and most particularly China) were a bright spot on an otherwise recession-dampered growth rate, primarily due to UPS’s investments in new hubs allowing for a greater reach of service area (UPS 2008 AR). UPS did FedEx one better on the debt front – they took out $4 billion in debt, but nearly all of it went to settle domestic pension issues (UPS 2008 AR). UPS had foreign currency gains in 2008, but FedEx took a loss (AR reports). Is this due to the different time periods involved, or due to better management/more diversity on the part of UPS? UPS states that the results of their acquisition of Sinotrans, formerly a Chinese express company, in 2004 have never been broken out because the results are not material to the overall financial statements (UPS 2008 AR).

FedEx Corporation. “2009 Annual Report.” UPS Corporation. “2008 Annual Report.”

Reference: FedEx Slashing Prices Starts Panic Among Domestic Players, February 2009. []. This article describes the panic caused by FedEx's decision to cut prices in China. Domestic competition viewed it as an unfair dumping tactic, and sent out alarm bells. One analyst (noted in the article as "wisely unnamed") pointed out that at least part of the fault lies in the domestic carriers' outdated equipment and logistics styles.

Reference: Very short news note. UPS Expanding Logistics Network in China. 1/14/10. [] from the New York Times (Associated Press). UPS is to create 101 new stocking locations in China, benefiting about 89 cities there.

New York Times search has not revealed any other good articles.

In Jul 2008, this article talked about how FedEx and UPS were doing in China: @http://proquest.umi.com/pqdweb?index=0&did=1524979841&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1264446040&clientId=16748. Found on Proquest. David Biederman, Journal of Commerce, Jul 28, 2008. It also mentions the creeping efforts of DHL to compete.

This article talks about a FedEx acquisition of a Chinese company: @http://proquest.umi.com/pqdweb?index=1&did=1496908281&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1264446613&clientId=16748. Also Proquest. Michael Taylor, China Staff. Feb 2008, Vol. 14, Iss. 2; pg. 2, 4 pgs. Frankel, Robert and Yemisi Bolumole. “Logistics in China: The Industry in 2006 and the Near Future.” Michaelman, Jeffrey E. and Chung Ping (Albert) Loh, editors. “China as an emerging Superpower: Challenges for China and the United States.” 2007, Center for International Business Studies, Coggin College of Business, Jacksonville, Florida. Brewster, Mike and Frederick Dalzell. “Driving Change: The UPS Approach to Business.” Hyperion, New York. 2007.

Lloyd's List February 13, 2009 Friday

 ** FedEx ** finally launches Chinese air cargo hub; The facility was initially set to open last December


 * SECTION:** Special Report - Asia Logistics; Pg. 11


 * LENGTH:** 641 words

FEDERAL Express, the US air express courier company, has been hit both by the global downturn and ongoing difficulties launching its Asia cargo hub at Guangzhou's Baiyun international airport in southern ** China. ** The impact of the global slump, which adversely affected the firm's second quarter results, is likely to be felt more when the company reports its third quarter results in March. Outlining the challenge faced by the company, chairman, president and chief executive Fred Smith said in December: "Our financial performance is increasingly being challenged by some of the worst economic conditions in the company's 35-year operating history." He indicated there had been a trend towards a slowdown in shipments and there was the expectation "economic conditions will remain very difficult through calendar 2009". Globally, **FedEx**  Express, MD-11 from Paris' Charles de Gaulle International Airport. But while the complex is operational, it is not yet officially open. A ** FedEx ** spokesman said: "This is after all a complex project so we wanted to make sure things are operating smoothly every step of the way to ensure high quality of service for customers before we are to officially announce its opening." Once the facility is officially open, ** FedEx ** "will decommission its facility at Subic Bay, Philippines, in due course". The Baiyun complex was planned to replace Subic Bay when ** FedEx ** ordered Airbus A380 freighters to replace its existing Boeing 777 freighters, exercising an option for a further 15 aircraft last month. Flight crews said the move to Guangzhou was still necessary because the 777s, which can carry up to 103 tonnes, were also too big to land at Subic. ** FedEx ** was also forced to cancel its five-year deal with ** China's ** Okay Airlines centred at Hangzhou's international airport, about 200 km from Shanghai, to provide domestic air cargo express services in  ** China ** following financial difficulties at Okay Airlines. ** FedEx ** used three Boeing launched a new Airbus A310 freighter flight to Hanoi, the Vietnamese capital, last September in the face of increased demand for air express services. The move strengthened the ** FedEx ** AsiaOne network, which provides more than 400 intra-Asian flights per week connecting 19 cities.


 * COMPANY:** ** FEDEX ** CORP (92%); BOEING CO (81%); AIRBUS SAS (81%); FEDERAL EXPRESS CORP (94%)


 * TICKER:** FDX (NYSE) (92%); BOE (LSE) (81%); BAB (BRU) (81%); BA (NYSE) (81%)


 * INDUSTRY:** NAICS492110 COURIERS & EXPRESS DELIVERY SERVICES (98%); NAICS488510 FREIGHT TRANSPORTATION ARRANGEMENT (98%); NAICS484122 GENERAL FREIGHT TRUCKING, LONG-DISTANCE, LESS THAN TRUCKLOAD (98%); SIC4513 AIR COURIER SERVICES (98%); SIC4215 COURIER SERVICES EX. BY AIR (98%); SIC4213 TRUCKING EX. LOCAL (98%); NAICS336414 GUIDED MISSILE & SPACE VEHICLE MANUFACTURING (81%); NAICS336412 AIRCRAFT ENGINE & ENGINE PARTS MANUFACTURING (81%); NAICS336411 AIRCRAFT MANUFACTURING (81%); SIC3761 GUIDED MISSILES & SPACE VEHICLES (81%); SIC3721 AIRCRAFT (81%)


 * GEOGRAPHIC:** GUANGZHOU, ** CHINA ** (90%); PARIS, FRANCE (52%) SOUTH  ** CHINA ** (92%); GUANGDONG,  ** CHINA ** (77%) ASIA (94%);  ** CHINA ** (93%); PHILIPPINES (90%); FRANCE (52%) East Asia


 * LOAD-DATE:** February 12, 2009


 * LANGUAGE:** ENGLISH


 * PUBLICATION-TYPE:** Newspaper

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