“The FedEx Ground network is far more endangered than everyone knows,” Patton said in a video Watched by Bloomberg. “There is no day without contact from fellow entrepreneurs looking for a safe and economical route from bankruptcy.”
More and more entrepreneurs are failing, especially after the depletion of federal pandemic aid. Additional payments will help contractors survive soaring driver wages and gas and truck prices, according to Patton, who ran a delivery consultant and helped hire companies on the FedEx network. In his letter, he asks FedEx to negotiate a pay raise by November 25, which coincides with Black Friday, the beginning of the US holiday shopping season.
Another group of entrepreneurs organized two petitions earlier this year, revealing reduced profits, software flaws in predicting package volume, and inefficiencies in the FedEx Package Sorting Center delaying drivers. Did.
In a previous response to contractor concerns, FedEx said it was aware of the challenges and is working to improve them.
Meanwhile, Raj Subramaniam, who became CEO from founder Fred Smith on June 1, is seeking to acquire skeptical shareholders, whose shares have fallen by 23% over the past year. He announced a surge in dividends and a reduction in fixed investment. The company then accepted two directors recommended by activist investors.
The new CEO is also looking for more money from FedEx’s most profitable business, the Ground unit. The division’s profit margin was reduced by a pandemic-fueled boom in e-commerce delivery. It’s less profitable than business shipments.
FedEx has made many changes, including increasing deliveries from 5 to 7 days a week to accommodate the growing number of home packages. Subramaniam recently advertised the expansion as one of FedEx’s strengths.
Read more: FedEx Ground delivery is a way to wealth for entrepreneurs
However, according to Patton, Sunday service is the responsibility of the contractor and must be scrapped. Not enough to manage the route effectively, and the extra days on the weekend can be a headache for the driver’s schedule. The option is also unprofitable for FedEx, costing a total of about $ 500 million annually, he said in his letter, citing “our estimate.”
The contractor also complains that FedEx charges customers fuel surcharges and transfers only some of the additional costs to the shipping company. FedEx said in its earnings announcement last month that fuel surcharges were a major driver of increased revenue per package.
Patton hosts an annual conference for entrepreneurs, and this year’s event in Las Vegas will be used to coordinate their response to FedEx. The meeting will form a committee of 10 to negotiate with FedEx management on behalf of the shipping company. According to Patton, more than half of the 6,000 contractors working on the ground unit will be present.
This type of activity is rare in the FedEx world. Fear of retaliation is widespread among the more than 12 entrepreneurs surveyed by Bloomberg. One reason is that ground units offer contracts for just one year and there is a trigger that allows FedEx to cancel them.
Patton said in a video that he “takes a great deal of risk” to counter FedEx. But he says he doesn’t want a “war” and has no plans to organize contractors. He called directly to Subramaniam to reduce subcontractor failures.
“I brought thousands of people to this space as an investment,” Patton said. “They rely on the cash flow of these businesses and confirm that they are a viable investment in the future.”
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