CINCINNATI — FedEx Ground contractors saw the latest rise in interest rates widen financial wounds that could hurt delivery speed.
The company pays small businesses to deliver packages. The 6,000 contractors are responsible for buying their own trucks, fuel, managing maintenance and compensating staff. As they see costs rising without more compensation, some contractors are on the brink of bankruptcy.
"We just can't weather that storm," said Spencer Patton, owner of Nashville-based Patton Logistics, one of the largest FedEx contractors in the country. "If contractors as small business owners are not able to afford our expenses, eventually we shut down and FedEx has no delivery network without its contractors."
In the last nine months, gas prices rose 37% in the Cincinnati area. Wages for contractor employees rose 30% too, Patton said. At the same time, compensation from FedEx remained the same. Contractors sign 12- to 18-month agreements with FedEx that many want renegotiated.
With competition for logistic services from Amazon and DHL, some of FedEx's Tri-State area contractors with decades of tenure are giving up. WCPO 9 News found routes for sale in Cincinnati and Northern Kentucky.
FedEx responded in a statement:
"FedEx Ground’s entrepreneurial business model comprises more than 6,000 service provider businesses, which earned an average revenue of $2.3 million last year," the statement said. "More than half of these businesses have provided service for FedEx Ground for five or more years, growing and evolving their companies alongside FedEx Ground as we jointly navigated opportunities presented by the rapid growth of e-commerce. 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.
"As each service provider agreement is negotiated individually based on a number of factors, including the unique characteristics of each business’ geographical service area, we have found that the most effective solutions are identified through direct engagement with each independent business. FedEx Ground teams across the network are continuing these productive discussions at a business-to-business level.”
"In my case and many other contractors, those requests were outright denied," Patton said.
Local contractors declined to speak on camera but voiced support for a letter Patton wrote on their behalf asking FedEx for better compensation. Without it, FedEx Ground deliveries could slow. A unified group of contractors will take action if FedEx refuses to renegotiate before Black Friday.
"What I hope is that FedEx Ground will take some of the price increases that they've passed to the customers: the fuel surcharges that they've passed through customers and award those to us because we're actually the ones using the fuel," said Patton. "There is no future for FedEx Ground without their contractors. So something is going to break here."
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