FedEx misses its earnings forecast -- could hybrid trucks be the culprit?

Awhile back I wrote about a mutual funds manager who took FedEx management to task for investing in hybrid delivery vehicles though there was no economic justification for it:

http://machinedesign.com/ContentItem/57416/Costlybutgreen.aspx

Then on Friday, FedEx missed its earnings target, saying, according to CBS Marketwatch:

FedEx Corp. warned Friday that fourth-quarter earnings are poised to come up well short of prior targets, adding that if oil prices continue to rise from this point, more damage to the bottom line could be on the way.

FedEx blaimed both a slowing economy and lower package volume as well as fuel costs for the shortfall, but did not say how much of the shortfall was due to either factor, at least not in the statements I've seen. There are a couple of things that could be said here. One is that presumably, some of the higher fuel costs FedEx is seeing presumably come from keeping its fleet of jets flying, which fly all its packages to Tennessee for distribution. I wonder if company management has considered turboprops as a means of reducing that fuel cost. You can find out more about what's new on the turboprop scene here:

http://machinedesign.com/ContentItem/70215/Fewertripsforthefueltruck.aspx

Second, one wonders how much benefit FedEx really gets out of a hybrid delivery truck in that the energy efficiency benefits only emerge during stops/starts. Vehicles that do a lot of stopping and starting will get the most benefit out of hybrid technology -- postal delivery vans and garbage trucks come immediately to mind. But for commercial vehicles that spend a lot of time on the highway, the payoff is less dramatic. There is no benefit from a hybrid powertrain while tooling along on a freeway. That's why a lot of Californians criticize the decision to allow single-occupant Prius' in the car pool lanes there.

My guess is that FedEx trucks may not do enough start/stop driving on average to get much benefit out of a hybrid powertrain. Some benefit, yes, but probably not enough to put much of a dent in the company's fuel costs. And when the additional capital costs of acquiring the hybrids are factored in, does FedEx come out ahead? The answer to that question would be interesting.

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Lee Teschler

Leland serves as Editor-in-Chief of Machine Design. He has 34 years of Service and holds a B.S. Engineering from the University of Michigan, a B.S. Electrical Engineering from the University of...
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