Ryder System Cuts Costs With Zero-Based Budgeting Amid Business Slowdown

The truck leasing and fleet management company slashed its travel budget and furloughed back-office workers

Water bottles with the Ryder System logo sat on display during a career fair in San Francisco. Ryder estimated that the pandemic and measures to limit its spread hurt pretax earnings by about $70 million in the first quarter.

Photo: David Paul Morris/Bloomberg News

Inc.’s use of zero-based budgeting to manage its monthly spending has helped it navigate the economic downturn caused by the coronavirus pandemic.

The Miami-based truck leasing and fleet management business cut discretionary expenditures through moves including furloughs in its back-office function and a reduction in its travel budget. That should lead to discretionary spending savings of $20 million in the second quarter, according to finance chief Scott Parker.

“Zero-based budgeting helped to evaluate and come up with the cost actions we announced,” he said. Mr. Parker declined to comment on how many employees have been furloughed.

The process requires managers to start from a budget of zero, justify every expense, assess spending patterns and rethink how to deploy resources to more swiftly achieve organizational priorities. is contrary to the prevailing method of adjusting the previous year’s spending plan, and forces managers to justify costs and evaluate benefits on a regular basis.

In a recent survey by Inc.,香蕉视频苹果下载 26% of CFOs said they would zero-base their budgets to respond to the coronavirus crisis. “As most CFOs watch their revenues fall steeply due to social isolation measures, they are taking a close look at all costs across the enterprise,” said Alexander Bant, Gartner’s global head of CFO advisory.

The process forces finance teams to be methodical and is time-consuming, he said, adding that more CFOs could move to this approach once the immediate crisis is over.

Ryder introduced the budgeting technique in 2017—before Mr. Parker’s arrival in April 2019—and repeats the process every month, Mr. Parker said. The company generated savings of about $50 million in 2018 and continues to save money through zero-based budgeting, though to a lesser extent, a spokeswoman said.

香蕉视频苹果下载However, zero-based budgeting alone won’t do it for Ryder, said Benjamin Hartford, a senior equity analyst at investment bank R.W. Baird. “The challenges they are facing are bigger than the incremental cost cuts they are generating through zero-based budgeting,” Mr. Hartford said.

The truck-rental company posted a net loss of $109.6 million for the first quarter, compared with a profit of $45.3 million in the prior-year period. Ryder estimated that the pandemic and measures to limit its spread hurt pretax earnings by about $70 million for the quarter, driven by depreciation from expected weaker used-vehicle sales.

Ryder also faces lower demand from commercial rental customers and from automotive customers who are using the company’s services as part of their supply chain to get components and parts to different places.

The company has taken additional measures to rein in spending, including a reduction in planned capital expenditures to a range of between $1 billion and $1.4 billion in 2020, down from the $2.1 billion forecast before the pandemic and the $3.6 billion that the company spent in 2019.

香蕉视频苹果下载“When things start slowing down, you have to take a different lens looking at cost,” Mr. Parker said.

Write to Nina Trentmann at nina.trentmann@wsj.com

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