XPO Logistics Inc. has named its chief information officer, Mario Harik, to run its LTL division, replacing Tony Brooks, who will retire, the company confirmed late Thursday night.
Harik (pictured), 42, who assumes the top LTL role in what XPO called an “acting” capacity, will also continue as XPO’s CIO, a position he has held since the original company was founded in 2011. In early August, XPO (NYSE: XPO) spun off its logistics operations, now known as GXO Logistics (NYSE: GXO). The original XPO comprises its LTL, brokerage and final-mile operations and is headed by Brad Jacobs, the company’s founder.
Brooks, 59, will stay on for an undetermined period to assist Harik with the transition, the company said. The management change is effective immediately.
The move is considered unprecedented in that IT executives rarely, if ever, become LTL bosses, a position reserved for people like Brooks who have spent their careers in operations. According to a source close to the company, XPO believes that the highly regarded Harik, who shepherded the IT integration of Con-way Inc. into the XPO system after it was acquired in 2015, understands XPO’s LTL business as well as anyone and is capable of managing both roles.
The elevation of Harik is Jacobs’ first major personnel action since the spinoff took effect. It comes as the LTL unit is rapidly digitizing long-manual processes. Its operating ratio, the measure of revenues to expenses and a key metric of an operator’s efficiency, is at or near all-time lows, meaning the unit is spending less on every revenue dollar it takes in.
Harik’s promotion is also a high-stakes move. The LTL business is the biggest contributor to XPO’s earnings base and is the key to boosting its valuation levels, the main objective behind the spinoff. Jacobs has said for years that the original XPO was undervalued because it was weighed down by a conglomerate’s discount, meaning the combined transportation and logistics businesses were too complex for analysts and investors to value XPO with adequate clarity.
The spinoff was part of Jacobs’ strategy to value the post-spinoff XPO as a pure-play LTL operator along the lines of Old Dominion Freight Line Inc. (NASDAQ: ODFL) and Saia Inc. (NASDAQ: SAIA). Both companies have historically been assigned higher valuations than the original XPO.
In an investor note early Friday, Amit Mehrotra, analyst at Deutsche Bank, said XPO’s LTL leadership has experienced “more churn than we would like to see.” Mehrotra added that he doesn’t expect a “smooth transition” in the wake of the management shuffle. However, the current macro backdrop for LTL, especially when it comes to pricing, is so favorable that it may offset any uncertainty surrounding the move, he said.
This had been Brooks’ second go-round as president of the LTL business. He left XPO in July 2018, only to return the following April after Kenny Wagers, who was serving as chief operating officer but was effectively overseeing the LTL operation, was terminated. XPO said the COO position was abolished amid the company’s decision to scale back on acquisitions, the main reason Wagers had been brought on board.
However, sources close to the situation said that Amazon.com Inc. (NASDAQ: AMZN), Wagers’ prior employer before joining XPO, had complained about the circumstances behind his hiring. Around that time, Amazon was doing about $900 million in business with XPO.
Starting in late 2018, Amazon began a process to remove two-thirds of that traffic from XPO and take it in-house.