- FedEx’s largest contractor is calling on the company to give contractors a raise by November 25.
- Spencer Patton told Insider he’s prepared to lose his own business to sound the alarm.
- Patton said Wall Street would “panic” if they knew “the degree to which the network is in danger.”
FedEx’s largest delivery contractor warned on Wednesday that the company’s thousands of contractors are in “dire” financial shape due to rising costs — and without a hike in compensation, the delivery network could fall apart.
Spencer Patton, CEO of Route Consultant, released a video and press release calling for a 50-cent per stop raise for delivery contractors and a 20-cent increase for long-haul trucking contractors by November 25. Patton has a fleet of 275 delivery trucks and 225 employees.
“The FedEx Ground network is in far more peril than what anyone realizes. If Wall Street analysts, if FedEx corporate, and FedEx ground understood the degree to which the network is in danger, there would be widespread panic,” said Patton 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 this effort is not a union and the committee will decide what to do if FedEx doesn’t act by November 25.
“FedEx Ground has no network without contractors. And we have no network without FedEx Ground. So we are inextricably linked here together in our mutual destiny,” Patton told Insider.
Dean Maciuba, a 35-year FedEx veteran and now managing partner at Crossroads Parcel Consulting, told Insider to his knowledge there’s no precedent for FedEx contractors organizing as Patton describes.
FedEx contractors going bankrupt due to rising costs
FedEx Ground, the company’s largest delivery service by volume, depends on roughly 6,000 small businesses that contract with the company for doorstep deliveries.
Patton’s business Route Consultant acts as a third-party broker for FedEx routes and for contractors looking to get out of the business. He said many contractors are exiting as they face bankruptcy due to the rising costs of fuel, labor, and trucks.
Patton’s plea follows two letters signed by hundreds of contractors sent to FedEx Ground management earlier this year when fuel prices began to rise. FedEx Ground CEO John Smith responded by telling contractors the company took a look at the fuel compensation in the contracts and decided no special action was necessary.
Contractor bankruptcies have accelerated over the summer, according to Patton.
A FedEx spokesperson told Insider via email that Ground contractors made average revenue of $2.3 million last year. “We recognize the shifting market dynamics and current economic conditions may pose new challenges for service provider businesses, and we remain committed to working with these businesses to create opportunities for continued success,” the FedEx spokesperson said.
A rare show of public outrage from a FedEx contractor
Though FedEx contractors have sent letters to the company collectively, it’s rare for a contractor to address the company publicly as Patton did Wednesday.
FedEx executives said on multiple occasions that contractors should address concerns in their individual contract negotiations.
Patton told Insider when he negotiated with FedEx earlier this year, “all of my requests were denied. And nearly every contractor that I talked to is in that same boat.”
Patton believes he could lose his contracts with FedEx due to his public statement. “I am a small business owner that has made a very public message to a $60 billion business,” he told Insider. “And that is really scary.”
Patton’s committee will be elected next month and every FedEx contractor in the country will be invited to vote regardless of attendance at the Las Vegas conference, Patton told Insider.
FedEx veteran Maciuba said he doubts FedEx will recognize any committee Patton forms.
In a statement about Patton’s plea, a FedEx spokesperson told Insider via email that because every contractor is unique, “we have found that the most effective solutions are identified through direct engagement with each independent business.”