UPS Names Operating Chief Abney as CEO -- 4th Update

By Dow Jones Business News, 
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By Laura Stevens

United Parcel Service Inc. named David Abney to succeed Chief Executive Scott Davis on Sept. 1, signaling the U.S. shipping giant's growing focus on international operations.

Mr. Abney, a 40-year company veteran and the current chief operating officer, will also be responsible for steering UPS through the explosion of e-commerce and improving its U.S. capabilities after it couldn't keep pace with Christmas shipments last year.

In keeping with tradition, the 58-year-old executive is a company insider, like every CEO before him. Mr. Abney has held several important posts, including president of UPS International from 2002 to 2007, when he expanded the company's global logistics.

The timing was also largely expected because of UPS's history of rotating out its CEO every five to seven years. But in a departure from past company practice, Mr. Davis, 62 years old, who has led the company since 2008, will stay on as chairman when he retires Sept. 1.

"I think the timing is right, and the company is in great hands," Mr. Davis said in an interview Friday with The Wall Street Journal.

Mr. Abney, he added, "has got a great understanding of the business. The world is changing around us very fast with e-commerce, with the emerging markets, and David's got a very good understanding of that."

Mr. Davis said the UPS board officially decided Thursday on Mr. Abney, although he'd been a favorite in the succession-planning process. He added that he doesn't expect any other members of the executive team to depart.

Many analysts had predicted Chief Financial Officer Kurt Kuehn would get the top job, in part because he has a more visible role with investors. But they said Friday that Mr. Abney is a good choice for the position, after a long apprenticeship that began as a part-time package loader in 1974.

"He's a UPS lifer, he's run the international business, and he's made acquisitions," said Kevin Sterling, an analyst with BB&T Capital. "David's got international experience, and that's a real focus area of growth for them."

UPS recently completed a $200 million expansion of its Cologne, Germany, hub, and has moved to rapidly build its network in China, including opening a new intra-Asia hub in 2010. The company also made a nearly $7 billion bid to acquire Dutch parcel-delivery company TNT Express NV, but abandoned the bid early last year after the European Commission raised stiff objections on antitrust grounds.

The international package operations booked a $1.76 billion operating profit last year, about a quarter of the company's total. Some 77,000 of the company's 395,000 employees are located outside the U.S., with UPS operations in more than 220 countries and territories.

Mr. Abney said in an interview that he will be focusing on three main areas as CEO: international sales and customer diversification, accelerating the use of technology, and providing better customer service.

"You know the world is changing, and the emerging markets are getting more and more important," he added.

Mr. Abney has been more active on the two most recent earnings conference calls with analysts, explaining the company's plan to recover from problems over the Christmas season. UPS acknowledged on Dec. 24, 2013, that it wouldn't be able to deliver all its packages on time because of a flood of unexpected last-minute online orders.

Mr. Abney said he has been leading a team on planning for this year's peak shipping season that started with a meeting on Dec. 26.

Mr. Davis is a 29-year company veteran. UPS said Friday it made significant improvements in its logistics network under Mr. Davis's leadership, rapidly growing international operations, and the supply chain and freight businesses despite rocky economic conditions.

" Scott Davis has skillfully guided UPS through one of the most turbulent global economic periods in history," Duane Ackerman, a member of the UPS board and chairman of the nominating and corporate governance committee, said in a news release.

Since Mr. Davis took over as CEO at the beginning of 2008, the company's share price has risen 50%. Revenue, meanwhile, increased to $55.4 billion in 2013 from $49.7 billion in 2007.

Jim Corridore, an analyst with S&P Capital IQ, cautioned that keeping the outgoing CEO as chairman carries risk. " Mr. Davis will have to step back and let Mr. Abney lead," he said.

UPS, founded in 1907, has always chosen its CEOs from within after founder Jim Casey stepped down following 55 years at the helm. Nearly all of the top executives have been with the company for more than 30 years. Many started as package sorters or drivers before working their way up through different divisions at the shipping giant.

In grooming leaders, the company often sends its executives around the world and puts them into assignments which will help them grow, said Jeffrey A. Sonnenfeld, a professor at the Yale School of Management and a close UPS observer.

Mr. Abney is a globalist and an operations wizard who "knows how to roll up his sleeves and resolve something on a grass-roots level," Mr. Sonnenfeld added.

Anna Prior contributed to this article.

Write to Laura Stevens at laura.stevens@wsj.com

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