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UPS CEO to retire
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August 16, 2001: 9:32 a.m. ET
Jim Kelly leaving in January; took company public and through '97 strike
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NEW YORK (CNNfn) - United Parcel Service Chairman and CEO Jim Kelly is retiring from the world's largest transportation company.
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Jim Kelly
UPS CEO will retire in January. | |
Kelly, who started his career with the company as a Teamster truck driver in New Jersey in 1964, will leave UPS at its regular board meeting in January. He will be succeeded by Michael Eskew, currently vice chairman.
Shares of UPS (UPS: down $0.09 to $55.75, Research, Estimates) were slightly lower in morning trading Thursday following the announcement.
Kelly, 58, has led the Atlanta-based company since January 1997. During his tenure the company endured a 15-day Teamster strike, the worst in its history, in August 1997, and went public in November 1999.
Eskew, 52, has been charge of strategic planning for UPS, leading its moves into new fields partly through acquisitions.
The company has acquired customs broker and overseas freight company Fritz Companies Inc. as well as Mailboxes Etc. during the last year. One of the world's richest companies, it is expected to buy other companies in the future. The need to have stock to use as currency in potential deals was one of the reasons behind its 1999 decision to go public.
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Michael Eskew
UPS vice chairman set to assume top spot. | |
Eskew joined the company as an industrial engineer in 1972. He subsequently held a number of management positions and helped start the company's airline operations in 1984.
He became group vice president for engineering in 1996, joined the company's board of directors in 1998 and was named an executive vice president in 1999.
Analysts said they weren't surprised by the move, that Eskew was being groomed for the position for some time, and that UPS has a traditional of rotating the CEO through internal promotion relatively frequently.
"This is not likely to be a company with a Jack Welch type of CEO and a cult of personality for 20 years," said Scott Flower, analyst with Salomon Smith Barney.
Flower and other analysts say that there is not likely to be any measurable change of direction at UPS under the new leadership.
"We don't anticipate any impact on the stock," said Ed Wolfe, analyst with Bear Stearns. "While Kelly has been both an important and strong leader as well as a terrific man, UPS is a large company with great management depth run by committee."
Jim Valentine, analyst with Morgan Stanley, gives Kelly an "A" for his tenure, choosing the right time to go pubic and moving the company into new overseas markets and businesses. But he said UPS, more than any other company he follows, has a consensus form of leadership among top executives, with should also limit any change at the company from one man's departure.
"You will rarely see Jim Kelly put foot down and demand it take a specific course of action. He's very democratic," said Valentine. "Going public, making acquisitions, the negotiations with the Teamsters – these are not decisions made solely on his own. It's a very close knit, experienced senior management team."
With 359,000 employees, 152,000 vehicles and 238 planes, UPS is by far the largest transportation company in the world, with revenue and market capitalization that dwarf any railroad, passenger airline or other freight company. It delivers nearly 14 million packages and documents daily, and is believed to handle the delivery of most goods purchased online.
Like other transport companies is has been hurt by the slowdown in the U.S. economy, forcing it to cut its earnings guidance repeatedly since last December.
The company's stock is only about 10 percent above its IPO price and is lower than its close on the first day of trading in November 1999. At that time the company was seen as a large-cap Internet play, a way for investors to buy shares of a profitable company that was seeing benefits from the growth of online retailing.
But while online retailing has continued to grow, the business of delivering those packages has always been a relatively small part of UPS' overall business, leaving the company vulnerable to cyclical downturns typical of transportation stocks when the excitement over Internet stocks died down.
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"I describe more as a market pressure than UPS problems," said Flower. "It's kind of tough to swim upstream in this period." 
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