United Parcel Service Inc. (UPS:US)’s David Abney led the internal review into last year’s stumble with last-minute Christmas deliveries. This holiday season, he will be running the company.
Abney is being promoted to chief executive officer from chief operating officer effective Sept. 1, in time for the run-up to the e-commerce rush. As CEO Scott Davis retires, investors will track how the 58-year-old Abney manages the fixes he put in place to avert a repeat of the 2013 delivery breakdowns.
The challenge falls to a 40-year UPS veteran who began as a part-time package loader, was his family’s first college graduate and is an avid runner and Mississippi State University football fan. To navigate arcane local-shipping rules in China and online shopping back home, he will draw on decades of UPS experience and a style associates describe as methodical.
“This upcoming peak season is going to be a big test for UPS after what happened last year,” Kevin Sterling, a BB&T Capital Markets analyst, said yesterday after the transition was announced. “The timing is interesting. Scott is stepping out of the way before peak season, giving David a chance to put his stamp on it.”
Operational knowhow has long been a focus at the world’s biggest package-shipping company, which is known for attention to details as minute as having drivers avoid left-hand turns to cut time in traffic.
Abney led the team that studied how to rebound from the late 2013 holiday shipments, an effort that spawned a $100 million, multiyear push at Atlanta-based UPS to expand some parcel facilities and accelerate use of new technology to make delivery routes more efficient.
Andy Dolny, a former investor relations official at UPS, said he expects Abney will overcome the company’s missteps from last year. “We’ll see how good he did,” Dolny said.
Abney’s own attention to detail will make him a success leading UPS, said Alex Molinaroli, CEO of Johnson Controls Inc., the Milwaukee-based maker of auto parts and building-control systems where Abney has been a director since 2009.
“When he brings in his material for board meetings, they are all dog-eared and highlighted and circled,” Molinaroli said in a telephone interview. “He asks lots of insightful questions.”
Tardy deliveries helped raise costs after the Christmas shopping crunch and sliced revenue by $50 million. Many online retailers still promised next-day delivery late on Dec. 23 even as UPS grappled with unexpected volumes and fallout from harsh winter weather earlier in the month.
UPS’s efforts will add capacity to deal with the crush of peak-period shipments and improve communication with UPS’s biggest customers so the company can better forecast demand, Abney said yesterday by phone.
“A change in CEO doesn’t necessarily bring about a change in strategy,” said Art Hatfield, a Raymond James Financial Inc. analyst based in Memphis, Tennessee. “I think the board wanted an operating guy.”
Investors may be happy to see more of the same. UPS has climbed more than 50 percent during Davis’s tenure (UPS:US), beating the Standard & Poor’s 500 Index. The shares were little changed at $103.59 at the close in New York. Hatfield recommends UPS as outperform, while BB&T’s Sterling rates the company as hold.
Abney’s appointment extends UPS’s signature management practices of naming leaders from within the company and changing CEOs after an average of about 5 1/2 years, a milestone that Davis reached in June 2013.
Regular CEO turnover has been a feature at UPS since founder Jim Casey left in 1962 after more than five decades in charge. Those transitions have earned UPS a reputation for stability in a situation yet to be faced by FedEx Corp. (FDX:US), which Fred Smith has led since starting the carrier in 1971.
Abney himself reflects some of the orderliness for which his employer is famous, according to Jeffrey Sonnenfeld, a Yale University business professor who previously taught at Emory University in Atlanta and has known all of UPS’s recent CEOs.
“If I’m around him for any length of time, I just like to have my desk organized,” Sonnenfeld said. “At his meetings, you don’t just sit through them. You’re always turning over every stone.”
Abney attended Delta State University in Cleveland, Mississippi, where he is a trustee, and told the school that earning his degree in 1976 made him his family’s first college graduate. A native of Greenwood, Mississippi, he runs five to six miles a day and coordinates an annual international business symposium on campus, Delta State President William LaForge said.
“If you met him on a street corner, you would probably never know he was chief executive of UPS,” LaForge said. “He’d probably sit down with you and share an adult beverage.”
Abney roots for the Mississippi State Bulldogs and routinely visits other schools for games, said Johnson Controls’ Molinaroli.
“His big thing is, every year with his son he goes to a different college stadium in the country,” Molinaroli said. “That’s their bucket list. He’s a good family man.”
Abney’s background includes leading UPS’s 2001 acquisition of Fritz Cos. for $450 million in stock, its largest deal as of that time. With operations in more than 120 countries, Fritz boosted UPS’s ability to move freight through customs, arrange air and ocean shipping and manage distribution. UPS combined Fritz and seven other purchases made over 18 months into a new customs-brokerage and freight-forwarding unit led by Abney.
“He’s got international experience, M&A experience and he’s a lifer,” said BB&T’s Sterling, who is based in Richmond, Virginia. “I think the direction the board wants to take UPS the next couple of years is to do more international expansion.”
Adding market share in Europe and Asia will remain part of UPS’s emphasis; the company’s 5.16 billion euro ($7 billion) bid for TNT Express NV (TNTE) collapsed last year. China also is an emphasis, and UPS and FedEx have both had to confront domestic regulations on internal shipments as they try to build their business in the world’s most-populous country.
“They realize they haven’t grown as quickly in Asia as they wish they had,” said Kelly Dougherty, a Macquarie Capital USA Inc. analyst in New York who rates the stock as outperform. “Europe is a huge focus. Their U.S. business is humming along nicely and a lot of the growth is going to be driven by the international business.”
UPS’s culture of internal promotions is so ingrained that some rank-and-file employees deemed Davis an outsider upon his selection as CEO, even though he had been at the company for 20 years, because he had never sorted packages or drove a truck.
Abney joked yesterday that his own tenure would make such a claim impossible.
“After being here 40 years, no one would consider me an outsider,” Abney said.
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