Yahoo Finance Risky way FedEx CEO saved his company from bankruptcy
FedEx, the world’s first overnight delivery company, services 220 countries and turned over US$65.4 billion (AU$94.8 billion) in 2018.
The company now employs nearly half a million people around the world, operates 630 planes and 79,000 ground vehicles, and sees to it that an average of 5,000 tonnes’ worth of freight is delivered every single day.
But, before FedEx was the success it is today, its founder Frederick Smith, found himself in a tight spot.
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Smith founded the company in 1971 with US$4 million of inheritance and US$80 million in loans and equity investments. But after its first run in 1973, FedEx’s funds dropped to just US$5,000.
And, with eight planes covering 35 cities, Smith realised he didn’t have the funds to pay the company’s US$24,000 jet fuel bill.
Rejected for a loan by General Dynamics and in a desperate bid to stave off bankruptcy, Smith took FedEx’s last US$5,000, flew to Las Vegas and played Blackjack.
He won US$27,000, which was enough to pay the fuel bill and operate for another week.
Smith’s business partner, Roger Frock, recounted the experience in his book Changing How the World Does Business: FedEx’s Incredible Journey to Success.
“I said, ‘You mean you took our last $5,000 – how could you do that?’
“He shrugged his shoulders and said, ‘What difference does it make? Without the funds for the fuel companies, we couldn’t have flown anyway,’” Frock said.
“It was not much, but it came at a critical time and kept us in business for another week."
That week was enough for Smith to secure US$11 million in loans and allowed the company to ride out the rough period.
By 1976, FedEx produced its first profit of US$3.6 million, and went public a few years later.
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