FedEx Faces Threat to Delivery

Many contractors say they're losing money on the deal as costs rise
By Bob Cronin,  Newser Staff
Posted Aug 25, 2022 7:10 PM CDT
Contractors Threaten FedEx Holiday Delivery
A Fedex driver pauses to rest last month in New York.   (AP Photo/Andres Kudacki)

Business has been good for FedEx Ground, whose revenue has climbed more than 60% from pre-pandemic levels. Many of the contractors who ensure packages reach consumers' doors are less happy with the situation: Up to 30% of them are losing money because of the rising cost of trucks, fuel, and drivers' pay, Deutsche Bank estimates. Some are talking about forming a trade group to improve the terms with FedEx, CNN reports, as well as sending the company a message by shutting down right before Nov. 25—Black Friday. "Peak season is one of highest cost-of-operations time of the year," said Spencer Patton, one of the largest contractors, who says he's losing money now. "I have to double the number of trucks, hire drivers. I will not do so if things don't change."

Shipments are transported by FedEx employees, but deliveries are handled by more than 6,000 contractors. The independent businesses pay for their own trucks and hire drivers, who wear FedEx uniforms, on contracts that may last 12 to 18 months, per the Wall Street Journal. The company and the contractors have said they'd like the other side to be more efficient. Ideas from contractors include ending Sunday deliveries and FedEx doing more training and working with staff members in an effort to improve communication, per KGTV.

Patton said the pressures include truck prices that have risen 30% in the past year and salaries, which he said are costing him 37% more. Fuel prices have dropped, he said, which helps. "But wage pressures remains boiling hot," Patton said. "We are actually competing against FedEx for drivers." Some contractors said they can't afford to take a chance on a shutdown. One in Oregon said he'd like to join in, "but it would put me in a situation where FedEx can step in and take the business away from me." There are contractors who are doing fine. "For me, luckily, I have an area where we're booming, expanding," said Troy Fulsom, who runs about two dozen drivers in Fresno. "But our profit margins are thinner. Your heart goes out to those in that position who need to set the ultimatum." (More FedEx stories.)

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