Machine Design

Costly but green

People attending a recent shareholder meeting for Federal Express Corp. might have been surprised when the discussion turned to hybrid vehicles.

Leland Teschler, Editor

A mutual fund that owns shares asked FedEx management to justify the introduction of hybrid delivery trucks into its fleet. In prior statements, FedEx had said its hybrid delivery truck program reduced particulate emissions by 96% and boosted fuel economy by 57%.

But the mutual fund, called the Free Enterprise Action Fund, wanted to know what it cost the company to own and operate these vehicles. Fund portfolio manager Steven Milloy says FedEx's CEO admitted at the meeting that the hybrid trucks made no economic sense. "His reason for going ahead with the program was that you never know when they (hybrid trucks) will make sense," says Milloy.

It's not like Milloy is against fuel efficiency or clean air. "Obviously fuel efficiency is a laudable goal, but at what cost?" he says.

Good point. Behind the Fund's proposal is the idea that the Green movement has bamboozled top management into making moves that aren't in the best interest of shareholders, the ultimate owners of the company. One wonders what would happen if the FedEx CEO applied the same justification to practices not equated with being Green.

FedEx isn't the only firm looking into hybrid trucks. United Parcel Service, for example, says it recently put 50 hybrids into service. Wal-Mart, known for keeping expenses to a minimum, even admits to having a few hybrids. But Wal-Mart is careful to justify its Green initiatives in dollars and cents. It calculates either a cost savings or an income figure for efforts ranging from recycling plastic packaging to cutting fuel costs on 18- wheelers using auxiliary power units.

Milloy thinks FedEx could take a few lessons about being Green from Wal-Mart, particularly at a distribution hub it operates in Oakland, Calif., that is predominately solar powered. "I talked to a Wal-Mart vice president in charge of environmental efforts," says Milloy. "He said Wal-Mart had tried wind and solar power and neither made any sense. So I'm sure solar power makes no sense for FedEx, either."

No surprise that Milloy promotes this view. One guiding principle of his mutual fund is that good business is good social policy. This isn't as ruthless as it might sound at first. The premise is businesses that take their eye off the ball risk sacrificing long-term prosperity and, eventually, jobs for their employees.

Which brings us back to the FedEx CEO's rationale for hybrid trucks. I have a new proposal for the next FedEx shareholder meeting. I suggest the company implement a pilot program using dirigibles as delivery vehicles. After all, you never can tell when an idea like that will make sense.

TAGS: Energy
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.