Fedex Watch Commentary http://www.fedexwatch.com//commentary/ en FedEx Watch Copyright 2009 2009-06-26T14:39:00+00:00 Eight states’ attorneys general eye FedEx drivers http://www.fedexwatch.com/commentary/entries/eight_states_attorneys_general_eye_fedex_drivers/ The attorneys general of eight states Thursday asked FedEx to work with them “in addressing changes in FedEx Ground’s business model” regarding worker classification.

Commercial Appeal
By Bartholomew Sullivan
Friday, June 26, 2009

WASHINGTON — The attorneys general of eight states Thursday asked FedEx to work with them "in addressing changes in FedEx Ground's business model" regarding worker classification.

The eight—from Iowa, Kentucky, Missouri, Montana, New Jersey, Ohio, Rhode Island and Vermont—express "common concerns regarding the proper employment classification of FedEx Ground drivers" already under review in some parts of the country.

"We are happy to work with the attorneys general to answer any questions they may have," said FedEx spokesman Maury Lane. "The right of FedEx Ground independent contractors to own and operate their businesses has been repeatedly validated, most recently by the U.S. Court of Appeals for the D.C. Circuit. We are confident that our discussions with the AG's will be productive."

FedEx considers its drivers independent contractors, while some of the drivers and some states contend they are employees. As independent contractors, drivers aren't afforded some of the labor protections guaranteed to employees. A federal appellate court in May, referred to by Lane, overturned a ruling by the National Labor Relations Board that had found certain workers employees and not independent contractors.

In lawsuits across the country, FedEx has been accused of misclassifying pickup and delivery drivers as independent contractors and of taking improper deductions from their pay while failing to pay overtime. Many of those cases are now consolidated and are being heard by a federal judge in Indiana.

Plaintiffs, including some represented by law firms in Batesville, Miss., and Memphis, maintain that what workers do, not what they're called, should determine their classification.

"State and local governments in Ohio are being cheated out of hundreds of millions of dollars each year as a result of employee misclassification," said Atty. Gen. Richard Cordray of Ohio in a separate statement. "We are committed to aggressively pursuing these misclassification cases to level the playing field for businesses that play by the rules and to protect Ohio's workers."

On another labor front, the House of Representatives passed a bill earlier this year that would subject FedEx Express workers not directly involved with the company's aircraft to the jurisdiction of the National Labor Relations Act and its rules permitting labor union organizing at the local level. The Senate is expected to consider the issue by the end of this summer.

FedEx Express employees are currently under the jurisdiction of the Railway Labor Act, which requires unions to organize under national labor agreements. FedEx earlier this month unveiled a multi-million-dollar campaign to persuade the public—and on-the-fence senators—that the provision passed by the House is a "bailout" of its chief rival, Atlanta-based UPS, whose drivers are unionized.

The International Brotherhood of Teamsters is actively seeking to organize FedEx drivers, and its efforts would be simplified by a change in the law. FedEx maintains that Express employees belong under the Railway Labor Act and national labor agreements to prevent single union locals from striking and bringing the worldwide logistics giant to its knees. FedEx says the effort to make it easier to organize the drivers is aimed at stifling competition and harming overnight delivery of crucial items.

"FedEx can't hide from its responsibilities to its workers," Ken Hall, a Teamsters International vice president, said in a statement emailed to news organizations Thursday. "Federal and state agencies are taking action to make sure FedEx doesn't skirt the law and pays its fair share. Thanks to officials like these attorneys general, FedEx and CEO Fred Smith won't be allowed to profit from this scheme at the expense of its work force and the American taxpayers."

The eight attorneys general say in their letter to FedEx general counsel Christine P. Richards that their individual states' laws regarding workers compensation, unemployment insurance, wage and hour protections and civil rights protections are their responsibilities and are all connected to employment status. They say that in order to address the issues, they have formed a "working group" to represent their interests "when the company considers any changes to its current business practices."

"While employment laws are unique to each jurisdiction, each state is committed to ensuring proper employment classification for purposes of the state employment programs we administer," the letter says. It also says the eight want to work with FedEx to make their states "whole for past practices."

—Bartholomew Sullivan: (202) 408-2726

 

]]> 2009-06-26T13:39:00+00:00 NY Times: Campaign Against Rival Could Haunt FedEx http://www.fedexwatch.com/commentary/entries/ny_times_campaign_against_rival_could_haunt_fedex/ The word bailout has gone from descriptive to derogatory.

  The FedEx-sponsored Web site BrownBailout.com (brown is both U.P.S.’s color and nickname) says that U.P.S. is “quietly seeking a Congressional bailout designed to limit competition for overnight deliveries.” Along with a “bailout-o-meter” showing U.P.S.’s revenue, and a spoof of a U.P.S. commercial, the site includes statements like, “This is a bailout, plain and simple, and the American people won’t stand for it.

The real issue here is not government-supplied cash for U.P.S., but the labor laws under which U.P.S. and FedEx are classified.

The House recently approved a bill that reclassified a FedEx division, making it easier for unions to form there, and FedEx is fighting that legislation as it goes to the Senate. In effect, FedEx is claiming that passage of the bill would be a bailout for U.P.S. by hampering a competitor.

FedEx’s casting of a labor-law dispute as a bailout has raised ire at U.P.S. and at the Teamsters union, which said on Tuesday that it planned to respond with its own public relations campaign.

Some advertising experts said FedEx was putting its own brand at risk by so aggressively attacking a competitor and accusing U.P.S. of taking a federal bailout.

“Hinging so much of this — even the site itself and the URL name — to a bailout brings some pretty significant risks,” said Scott Elser, a partner in LaunchPad Advertising, which is not working with either company. “It’s arguably one of the most controversial terms that you can define in politics today. They draw you there based on that, and you don’t have to surf very long to realize that this is clearly not a bailout as most consumers and business people would define it, which is writing a check to a troubled business.”

“It’s a little bit of a bait and switch,” Mr. Elser said, which “has the ability to potentially harm their brand.”

FedEx is objecting to a provision in a Federal Aviation Administration reauthorization bill that the House passed in May. The legislation would classify nonairline employees from FedEx’s Express division, which makes overnight deliveries, under the National Labor Relations Act rather than the Railway Labor Act, which currently governs Express as well as airlines and railroads. The reclassification would make it easier to unionize the division, since N.L.R.A. unions are allowed to form at a company’s individual sites; under the railway act, unions need national support from a majority of a company’s workers.

U.P.S., which is heavily unionized, is governed under the N.L.R.A. And it has been lobbying to get its competitor’s Express division classified under that act.

“FedEx is appearing to spend millions of dollars to try to convince Congress that a FedEx driver delivering a package is different from a U.P.S. driver delivering a package,” said Malcolm Berkley, a U.P.S. spokesman.

Mr. Berkley said it was a competitive issue for U.P.S. “FedEx Express uses the fact of the labor law it is currently under inappropriately as a lever when talking to U.P.S. customers, particularly when we’re negotiating our contracts,” he said.

FedEx’s labeling of the legislation as a bailout was wrong, he said.

“There’s clearly no way we’re seeking a bailout. In fact, what we’re doing is working to eliminate an earmark that has been given to FedEx for some years,” he said.

Executives from the Teamsters, which represents 240,000 U.P.S. workers, also said the bailout campaign was misleading.

“It is just the height of hypocrisy for them to allege that there is a bailout of their competitor, when in fact, it’s the company, it’s FedEx, who has benefited from this misclassification of their workers,” said Ken Hall, international vice president and director of the package division at the Teamsters. “It’s laughable to think that they would portray this as some bailout. This is simply leveling the playing field.”

While Mr. Berkley said U.P.S. was not planning a campaign in response, the Teamsters would, Mr. Hall said.

“Particularly, it’s going to be a grass-roots and an educational program to make sure that those folks in Congress truly understand the issue.”

FedEx, meanwhile, has been arguing that the different classification makes sense, since its roots and ways of doing business are different from those of U.P.S. “Our company and U.P.S. are fundamentally different companies,” said Maury Lane, director of communications at FedEx. “They aren’t and shouldn’t be regulated the same way.”

As for the bailout characterization, “that piece of legislation only helps one company while hurting a main competitor — if that’s not a bailout, we’re going to have to redefine the word,” he said.

Late last year, FedEx’s chief executive, Frederick W. Smith, signaled the company would fight hard against any potential legislation.

“We’ve said repeatedly that it is extremely bad public policy,” Mr. Smith said in a conference call with investors. “We would hope that provision would not see the light of day.”

Labor experts differed on the companies’ positions. Karen E. Boroff, the dean of the Stillman School of Business at Seton Hall University, said she found FedEx’s arguments persuasive. “FedEx absolutely has a right to be concerned about tiny little bargaining units interrupting the flow of their delivery,” she said. And, she said, workers doing similar jobs were often classified under different labor laws. But James J. Brudney, a law professor at the Moritz College of Law at the Ohio State University, said that FedEx Express’s classification was “a historical anomaly.”

“From the workers’ point of view, it seems unfair,” he said.

Advertising executives who reviewed the Web site said that it did some things very well.

“I give them credit for inventiveness,” said Steve Centrillo, a principal at A-Team Advisors, a consultant to advertising agencies that is based in New York.

Pinning the problems on U.P.S. rather than on unionization helped FedEx avoid sticky labor relations questions, he said.

But, Mr. Centrillo said, the use of bailout was “the most questionably ethical thing on the site.

“It’s taking a word that is extremely loaded right now, and implying that somehow, the government is writing a check to U.P.S., which is clearly not the case.”

]]> 2009-06-10T10:52:00+00:00 U.S. House Approves Legislation Fought by FedEx, Airlines http://www.fedexwatch.com/commentary/entries/us_house_approves_legislation_fought_by_fedex_airlines/ FedEx Corp. truck drivers, package handlers and other employees would be able to join unions more easily under legislation the U.S. House approved today. Workers in FedEx’s Express unit could vote locally to join unions under the plan rather than having to hold a national election to gain representation. The labor provision was included by Representative James Oberstar, a Minnesota Democrat, in broader $53.5 billion legislation to finance the Federal Aviation Administration through fiscal 2012. By John Hughes

May 21 (Bloomberg)—FedEx Corp. truck drivers, package handlers and other employees would be able to join unions more easily under legislation the U.S. House approved today.

Workers in FedEx’s Express unit could vote locally to join unions under the plan rather than having to hold a national election to gain representation. The labor provision was included by Representative James Oberstar, a Minnesota Democrat, in broader $53.5 billion legislation to finance the Federal Aviation Administration through fiscal 2012.

The 277-136 vote sets up a clash in the Senate between FedEx and larger competitor United Parcel Service Inc., which says the legislation would even the playing field with UPS’s union workforce. UPS workers organize under the National Labor Relations Act, which allows local organizing. FedEx operates under the national organizing standard used for airlines.

“The House of Representatives has done the right thing in closing this unfair loophole,” Teamsters President Jim Hoffa said in a statement. “FedEx Express workers have been deprived their right to form unions like workers at other package- delivery companies.”

The Senate hasn’t yet crafted its version of the bill. The House approved similar legislation in 2007 that wasn’t taken up by the Senate.

“Americans shouldn’t tolerate more bailouts for companies that can’t compete,” FedEx spokesman Maury Lane said in an e- mail. “Hopefully the Senate will understand the unintended consequences of these actions.”

The Teamsters have been trying to organize FedEx drivers for years. Atlanta-based UPS is the biggest employer of Teamsters, with about 240,000 workers. Pilots are the only major worker group represented by a union among FedEx’s 290,000 employees and contractors.

Same Regulations

“We simply believe that two companies performing the same business should be regulated the same way,” said Norman Black, a UPS spokesman. “There is nothing that can justify treating the two companies differently.”

FedEx said in a March 20 regulatory filing it may not buy 30 more Boeing Co. 777 freighters should the provision on unions become law.

Business groups have also opposed other provisions in the bill. The Air Transport Association, a trade group for U.S. airlines, said in March carriers would be forced to cut jobs if a proposal to set time limits on antitrust immunity for global alliances becomes law.

The provision would require carriers, including Delta Air Lines Inc. and UAL Corp.’s United Airlines, to seek U.S. renewal of the clearances after three years. Oberstar, the sponsor of the provision, has said alliances reduce competition.

Business Opposition

The Washington-based Air Transport Association also opposes part of the bill that would increase a passenger fee for airport construction projects to as much as $7 from the current maximum of $4.50. The provision would cost $2 billion or more a year, the association’s president, James May, said in a May 18 letter to House leaders.

The U.S. Chamber of Commerce, the world’s largest business federation, opposes a separate section of the bill that would remove the FAA administrator’s ability to impose contracts on air-traffic controllers. Under the measure, disagreements over a new contract would go to federal mediation.

The National Air Traffic Controllers Association, the union representing the 15,000 workers, sought the legislation after then-FAA Administrator Marion Blakey imposed a contract in 2006. The action cut starting controller pay 30 percent and was to save $1.9 billion over five years, the FAA said at the time.

Bruce Josten, the Chamber’s executive vice president of government affairs, said in a letter to House members yesterday that the controller provision wouldn’t be in taxpayers’ interest. The controllers’ union has said the imposed contract led to excessive workloads and fatigue.

The Chamber also opposes a bill provision that would require FAA inspections of airlines’ overseas repair centers twice a year. The provision violates an aviation safety agreement with the European Union, the group said in its letter.

To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

]]> 2009-05-22T13:48:00+00:00 FedEx Drivers Win Class Cert. In Overtime Suit http://www.fedexwatch.com/commentary/entries/fedex_drivers_win_class_cert_in_overtime_suit/ By Erin Fuchs
Emploment.Law360, New York (April 23, 2009)—A federal judge in California has certified five subclasses of drivers alleging FedEx Corp. bilked them of pay for missed meal periods, off-the-clock work and working split shifts. Judge Thelton E. Henderson of the U.S. District Court for the Northern District of California approved the five subclasses Tuesday.

He denied a motion to approve a sixth class, though, which would have consisted of drivers alleging FedEx hadn't paid them for inaccurate wage statements or paid their full wages when they left the company.

Judge Henderson also stayed further proceedings on three of the subclasses pending a California Supreme Court review of two employment cases. The high court will determine whether the word "provide" necessitates that employers certify that workers take breaks or simply requires them to offer the opportunity.

The subclasses would consist of delivery drivers or couriers employed by FedEx between April 14, 2006, and the present, all of whom are claiming FedEx denied them wages.

Three of the subclasses relate to meal periods. The first consists of workers not paid for meal periods lasting less than 30 minutes. The second subclass consists of workers alleging they weren't paid for missed or untimely meal periods between April 14, 2006, and March 25, 2007.

The third meal-period sub-class, meanwhile, consists of drivers alleging FedEx didn't pay them for meal breaks taken after four and a half hours of work but before five and a half hours of work between March 36, 2007, and the present.

The fourth subclass approved by the judge alleges they never received the extra hour of pay that was due to them for working a split shift.

The final approved subclass consists of workers claiming they performed approved pre- and post-work activities off the clock without pay.

The FedEx drivers' meal claims relate to a California statute currently in dispute. The law requires employers who fail to provide a meal or rest period to pay the worker for an additional hour of work at their regular rate of pay.

California's wage law also requires employers who fail to provide meal or rest breaks in accordance with certain procedures - such as giving employers a 30-minute meal period for every five hours worked - also must compensate workers.

Two California courts of appeal have ruled that "provide" only means employers must make meal breaks available and not ensure workers take them.

But the California Supreme Court has recently granted review of the two cases.
"Accordingly, the court cannot interpret the statute in this regard, except to note that it is not necessary to rule on the meaning of 'provide' to resolve the current motion," Judge Henderson said.

Common issues predominate for the first five subclasses, the judge said. But he denied the sixth subclass relating to wage statements and separation pay because FedEx lacked proper notice on the claim.

Attorneys for the defendants and the plaintiffs didn't immediately respond to requests for comment on Thursday.

The plaintiffs are represented by the Law Offices of Daniel Feder.
FedEx is represented by Littler Mendelson.
The case is Paul Bibo et al. v. FedEx Corp., case number C 07-2505, in the U.S. District Court for the Northern District of California.

]]> 2009-04-30T19:21:01+00:00 Teamters Statement on U.S. Appeals Court FedEx Decision http://www.fedexwatch.com/commentary/entries/teamters_statement_on_us_appeals_court_fedex_decision/ The following is a statement by Ken Hall, Teamsters International Vice President and Director of the Teamsters Package Division, regarding yesterday’s decision on FedEx Home by the U.S. Court of Appeals for the District of Columbia. The following is a statement by Ken Hall, Teamsters International Vice President and Director of the Teamsters Package Division, regarding yesterday's decision on FedEx Home by the U.S. Court of Appeals for the District of Columbia:

"We are disappointed in the court's decision to deprive FedEx drivers of the right to form unions and bargain for better working conditions and wages, leaving them at the mercy of this notoriously anti-worker company run by a member of the Forbes 2008 Billionaires Club. We are confident that the decision will not survive review by the full court or by the U.S. Supreme Court.

"The Teamsters' fight on behalf of these workers will not stop. We remain committed to those FedEx drivers who have sought the protection of a legitimate collective bargaining agreement to improve their lives.

"The facts remain: More than 30 states continue administrative and tax reviews of the employee status of FedEx Home drivers. The IRS is examining the company's tax classification for 2002, 2004, 2005 and 2006, and the federal courts are still hearing the national and state claim lawsuits.

"The National Labor Relations Board has primary authority to determine whether workers are properly classified as employees or independent contractors, and reviewing courts are required to defer to the board's justifiable findings. In yesterday's decision, the majority of the court chose to ignore its legal obligation to defer judgment to the NLRB, disregarding detailed findings.

"Since 1968, the Supreme Court has consistently instructed the NLRB to use a common-law test to determine employee status, which led to the finding that the drivers are employees. The court majority disregarded virtually all of these factors required by the Supreme Court in favor of an evaluation on whether the drivers had ‘potential entrepreneurial opportunities.' As noted by the dissenting judge, the majority failed to apply the proper standard for determining employment status.

"The reality of the workplace, as found by the NLRB's reasoned decision, is that FedEx clearly controls the daily existence of the driver. Yet they are without the legal protections and benefits of employees."

 

]]> 2009-04-23T20:26:00+00:00 Teamsters Tell FedEx: Don’t Hold American Jobs Hostage http://www.fedexwatch.com/commentary/entries/teamsters_tell_fedex_dont_hold_american_jobs_hostage/ Union Denounces FedEx Attempt to Leverage Congress Through
Threat to Pull $10 Billion Contract with Boeing

(Washington, DC) - In another attempt by FedEx to deny its workers the right to organize, the company today leveled a challenge to legislators in a filing with the Securities and Exchange Commission, revealing that the company would cancel a $10 billion contract to purchase Boeing 777 planes if FedEx Express workers were moved under the National Labor Relations Act (NLRA).

FedEx clearly states in the filing that its contract to purchase additional aircraft from Boeing is contingent upon its labor relations for all of its employees being governed by the Railway Labor Act (RLA).  Under this provision, if Congress dares to grant even a portion of its workers the rights enjoyed by most American private sector employees under the NRLA, FedEx has the right to cancel those purchase orders. 

"FedEx apparently is not content with cutting wages, increasing employees' medical insurance premiums and eliminating pension benefits for its employees. Now it is threatening to leverage a contract to purchase additional aircraft from an American company to blackmail Congress," said Ken Hall, Teamsters International Vice President and Director of the Package Division. "It is a slap in the face to Congress and the American people. The bill should be evaluated on its merit - not upon the threat of FedEx to fire another torpedo through the American economy."

At least one industry analyst has speculated that FedEx may purchase planes in the future from foreign manufacturers. Apparently, not only are the rights of its employees on the table, now FedEx is willing to bet the future of the employees of Boeing and GE - the manufacturer of Boeing's engines - and the employees of dozens of other American manufacturers who supply components of Boeing's planes.

Currently, all workers at FedEx Express are covered by the RLA regardless of whether they have any direct relationship with the operation or maintenance of the air fleet. This includes package delivery drivers, workers at sorting facilities and truck mechanics.

Pending legislation that is a part of the Federal Aviation Administration reauthorization would place those workers under the NLRA, the statute that protects virtually all other private sector workers. Under the NLRA, workers may organize by individual terminals while the RLA requires a more difficult path to unionization that requires a national vote by every worker at FedEx Express.

"At a time that we should be putting workers first, Fred Smith is playing politics with American jobs," said Teamsters General President Jim Hoffa. "Americans are fed up with this type of irresponsible and shortsighted behavior from CEOs. Fred Smith should be treating workers like a crucial part of a successful business - not like a bargaining chip in his political games." 

Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women in the United States, Canada and Puerto Rico.


]]> 2009-03-25T15:02:00+00:00 Memphis Paper Notes Obama Won Election http://www.fedexwatch.com/commentary/entries/memphis_paper_notes_obama_won_election/ Elections have consequences.  When the CEO of a major corporation publicly backs a candidate and that candidate loses, that has consequences too.

The Memphis paper  notes: "Changing of presidential guard to ripple in Mid-South; Major impact from FedEx to the farm" -

For FedEx, the region's largest employer, an Obama presidency is likely to mean legislative or regulatory remedies to years of litigation over the status of what the company calls "independent contractors" and others call "employees." Change may also come in the kind of legal jurisdiction over future labor agreements.

While still considered a long shot for president, Barack Obama introduced the Independent Contractor Proper Classification Act in September 2007—one of his few legislative initiatives in the Senate.

The bill would have required employers to treat workers misclassified as independent contractors as employees for employment-tax purposes.

FedEx maintains its drivers are independent small-business entrepreneurs who can set their own hours and hire assistants. A class-action lawsuit involving the status of drivers in 20 states is pending in Indiana.

If some FedEx contractors are ultimately deemed employees, according to an analysis by Bloomberg News, it might open the company to $2.5 billion in unpaid payroll taxes. The Teamsters Union, which would like to organize FedEx drivers like it has competitor UPS, estimated the change from contractor to employee status would cost FedEx $426 million more a year.

Meanwhile, House Transportation Committee chairman James Oberstar is determined to make FedEx Express drivers subject to the National Labor Relations Act, permitting them to organize collective bargaining units at the local level. Oberstar introduced the proposed change as an amendment to the Federal Aviation Administration Reauthorization Act in late 2007.

A final bill for the president's signature never emerged, but the provision is expected to be reintroduced in another bill early this year.

In remarks to financial analysts on Dec. 18, FedEx CEO Frederick W. Smith said bluntly that he hoped Oberstar's provision "would not see the light of day." He added that, if it does, he hoped that it would be the subject of congressional hearings.

"Obviously, the unions have the right to try to organize our folks and it's their right to decide on that if that's what they want," he said. "But we think that our form of success has been pretty good for the past 35 years."

Since the company's inception, FedEx employees have been subject to the jurisdiction of the Railway Labor Act, which governs air and rail collective bargaining agreements nationally. The company maintains that it operates an integrated air and delivery service and its entire international operation could be affected by a labor dispute at a single local bargaining unit.

Michael C. Harper, a labor law expert at the Boston University School of Law, said an Obama Labor Department is more likely to find that FedEx drivers are employees under the terms of the Fair Labor Standards Act and he said the Treasury Department is more likely to find them employees for payroll tax purposes.

"The likelihood of their being successful in continuing to be able to treat these drivers as independent contractors under these various laws is lower because Obama was elected," Harper said.

]]> 2009-01-06T19:39:00+00:00 Fortune Mag: Ask Fred Smith Questions! http://www.fedexwatch.com/commentary/entries/fortune_mag_ask_fred_smith_questions/ Fortune.com is offering readers of its web site the opportunity to ask Fred Smith questions.

http://money.cnn.com/magazines/fortune/questionsfor/index.html

The only word of caution is to briefly introduce yourself - something like "I am a FedEx worker for XX years" - so that your question is grounded in your first hand experience and knowledge of the company; that way your question can't be dismissed out of hand.

Go ahead.  Fire away.


]]> 2008-09-11T12:40:00+00:00 New York Post Calls Fred Smith One of ‘Week’s Losers’ http://www.fedexwatch.com/commentary/entries/new_york_post_calls_fred_smith_one_of_weeks_losers/ No further comment necessary.

New York Post: Week's Winners and Losers

]]> 2008-08-27T13:58:00+00:00 FedEx Express Reexamining its Business Model http://www.fedexwatch.com/commentary/entries/fedex_express_reexamining_its_business_model/ At least, this re-examination is the focus of an analysis by a writer for Air Cargo News.  Reporter Michael Fabey writes, "While harboring hopes the U.S. economy will turn around and fuel prices will start to level off, FedEx is positioning itself for what company officials say is an altered industry landscape."

Over the history of Federal Express and FedEx, the overnight delivery service has been the primary revenue generator for the company.  The profits earned by FedEx Express allowed Federal Express to grow into the FedEx Corporation through a series of pricey acquisitions - Flying Tigers, Caliber/RPS, American Freightways, Kinko's, World Tariff, Watkins and others.

But even as FedEx Corp diversified into other lines of services, FedEx Express remained the golden goose.  Express accounted for 58% of operating income in fiscal year 2007 and 64% of operating income in fiscal year 2008.

Customers, however, are becoming much more cost-conscious.  UPS and FedEx are competing for customers across all delivery services - overnight letter and box, small parcel, supply chain services, expedited freight, less-than-truckload and truckload freight.

UPS and FedEx may sell the consolidated services to customers in similar ways.  But the way the two companies are structured to carry out those services is quite different.  So it is not only FedEx Express that is the object of Fred Smith's re-examination.  It is the whole 'segmentation' of FedEx services. 

FedEx got along for a period of time with its "Compete collectively, operate independently, manage collaboratively" strategy.  (It also makes for a great anti-union structure with employees and even "independent contractors" all broken apart.)  Under this "strategy," one FedEx company would pay "intercompany charges" or "purchased transportation charges" of another FedEx company for its services.

The slowing economy and sky-high jet fuel, diesel and gasoline prices are spurring FredEx's mind into action.

But in the end, FedEx Express has all those planes in their hangars.  A single customer still gets its overnight letter delivered by a FedEx Express driver and gets its three-day package delivered by a FedEx Ground "contractor."   And FedEx Express linehaul and FedEx Ground linehaul and FedEx Freight linehaul all must ‘operate independently.' And a FedEx Express courier and a FedEx Ground "contractor" and a FedEx Freight drivers all must make separate deliveries and ‘operate independently.'

This story is to be continued… 

 

]]> 2008-08-08T13:34:00+00:00