Largest FedEx ground contractor warns bankruptcies are looming – Business Insider | Vette Leader

  • FedEx’s largest contractor is urging the company to give contractors a pay rise by Nov. 25.
  • Spencer Patton told Insider he was willing to lose his own business to sound the alarm.
  • Patton said Wall Street would “panic” if it knew “the extent to which the network is at risk.”

FedEx’s largest delivery service provider warned on Wednesday that the company’s thousands of contractors are in a “grim” financial position due to rising costs – and without an increase in compensation, the delivery network could collapse.

Spencer Patton, CEO of Route Consultant, released a video and press release calling for a 50 cent increase per stop for delivery companies and a 20 cent increase for long haul contractors through November 25. Patton has a fleet of 275 vans and 225 employees.

“The FedEx Ground network is in far more danger than anyone realizes. If Wall Street analysts, the FedEx company and the FedEx floor understood the extent to which the network was at risk, there would be widespread panic,” Patton said in the video.

In August, Patton’s company will hold an annual conference in Las Vegas where FedEx Ground contractors will elect a 10-member committee that will attempt to negotiate with FedEx Ground. Patton said these efforts are not union and the committee will decide what to do if FedEx doesn’t act by Nov. 25.

“FedEx Ground does not have a contractor-less network. And we don’t have a network without FedEx Ground. So here we are inextricably linked in our common destiny,” Patton told Insider.

Dean Maciuba, a 35-year FedEx veteran and now a managing partner at Crossroads Parcel Consulting, told Insider that to his knowledge there is no precedent for organizing FedEx contractors like Patton describes.

FedEx contractors go bankrupt due to rising costs

FedEx Ground, the company’s largest delivery service by volume, depends on approximately 6,000 small businesses that contract with the company for doorstep delivery.

Patton’s Business Route Consultant acts as a third-party provider for FedEx routes and for contractors who want to go out of business. He said many contractors are pulling out as they face bankruptcy due to rising costs for fuel, labor and trucks.

Patton’s plea follows two letters signed by hundreds of contractors and sent to FedEx Ground Management earlier this year as fuel prices began to rise. FedEx Ground CEO John Smith responded by telling contractors that the company had looked at fuel compensation in the contracts and decided no special action was needed.

Contractor bankruptcies accelerated over the summer, Patton said.

A FedEx spokesman told Insider via email that ground contractors averaged $2.3 million in revenue last year. “We recognize that changing market dynamics and current economic conditions may present new challenges for service providers, and we remain committed to working with these companies to create opportunities for continued success,” said the FedEx spokesman.

A rare public outcry from a FedEx contractor

Although FedEx contractors have jointly sent letters to the company, it’s rare for a contractor to address the company publicly like Patton did Wednesday.

FedEx executives have repeatedly said that contractors should address concerns in their individual contract negotiations.

Patton told Insiders while negotiating with FedEx earlier this year, “All my requests have been denied. And almost every contractor I’ve spoken to is in the same boat.”

Patton believes he could lose his contracts with FedEx as a result of his public statement. “I’m a small business owner who delivered a very public message to a $60 billion company,” he told Insider. “And that’s really scary.”

Patton’s committee will be elected next month and every FedEx contractor in the country will be invited to vote regardless of their attendance at the Las Vegas conference, Patton told Insider.

FedEx veteran Maciuba said he doubts FedEx will recognize Patton forms for committees.

In a statement on Patton’s plea, a FedEx spokesperson emailed Insider that because every contractor is unique, “we have found that the most effective solutions are identified by working directly with each independent company.”

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