The head of FedEx Corp.’s ground-parcel unit said it will not work with any groups or individuals who want to negotiate changes to driver contractor agreements on behalf of a collective of contractors.
In a letter to contractors reviewed by FreightWaves, John Smith, CEO of FedEx Ground, said the unit will not “discuss, negotiate, or renegotiate service provider agreements or financial terms” with parties representing a group or groups of contractors. The unit works with about 6,000 driver contractors, which collectively employ thousands of package-delivery drivers.
The model that governs the relationship between FedEx Ground and its contractors was “built around the recognition that each business has unique and distinct characteristics and entrepreneurial goals,” Smith wrote.
As a result, each agreement will continue to be negotiated individually, Smith wrote. He added that service providers attempting to negotiate financial terms as a group breach their contract with FedEx Ground (NYSE: FDX).
Smith’s comments are the unit’s first public response to a letter published last week by Spencer Patton, a Nashville, Tennessee-based contractor with a 10-state territory. Patton said that contractors meeting next month in Las Vegas plan to nominate a 10-person committee to speak on behalf of all contractors.
The committee’s focus will be to negotiate cost changes to contractor agreements, Patton said.
He said the “timeline for these negotiations will remain open” until Nov. 25, which coincides with the formal launch of the holiday delivery season.
Patton told FreightWaves that he wasn’t setting any deadlines or implying any threats against FedEx Ground. The purpose of the language, he said, was to alert FedEx Ground that contractors were being squeezed by dramatic cost increases, and that without financial support from the unit — namely increases in the pay contractors receive per stop and in line-haul operations between hubs — many contractors would have difficulty surviving beyond the end of the year.
Smith interpreted Patton’s motives differently. He said that the letter and an accompanying video made “across-the-board” financial demands of FedEx Ground along with a deadline for the company to agree to them.
Smith also took issue with Patton’s claims that the turbulence in the contractor network was compromising delivery service levels. Service reliability has improved significantly since January, including a steady climb over the past three months, Smith said. He did not elaborate.
FedEx Ground’s service levels had been affected by staffing shortages within its hub network, but the unit has said those problems are behind it.
Late last week, FedEx Ground said that it would end Sunday deliveries across part of its nationwide network. Patton’s letter had urged the unit to rethink the viability of Sunday deliveries, saying it was an earnings drag on FedEx Ground and was a major cost burden on the contractors with relatively little upside.
Smith said in the letter that changes to the Sunday service had been under discussion for months.
The tenor of Smith’s letter is not surprising. Other than its pilots, FedEx has been nonunion for its entire history. Founder and Executive Chairman Frederick W. Smith has no patience for third-party bargaining units.
Smith only accepted the Air Line Pilots Association on the property because it already represented the pilots at the old Flying Tiger Line, which FedEx acquired in 1987.