CINCINNATI — FedEx Ground contractors have seen the latest interest rate hike deepen financial wounds that could hurt delivery speeds.
The company pays small businesses to deliver the packages. The 6,000 contractors are responsible for purchasing their own trucks, fuel, managing maintenance and paying staff. As they watch costs rise without more compensation, some entrepreneurs are on the verge of bankruptcy.
“We just can’t weather this storm,” said Spencer Patton, owner of Nashville-based Patton Logistics, one of the nation’s largest FedEx contractors. “If contractors as small business owners are unable to pay our expenses, we will eventually close and FedEx does not have a delivery network without its contractors.”
Over the past nine months, gas prices have risen 37% in the Cincinnati area. Wages for contractor employees have also increased by 30%, Patton said. At the same time, FedEx’s compensation remained the same. Contractors sign 12 to 18 month agreements with FedEx that many want to renegotiate.
With competition for logistics services from Amazon and DHL, some of FedEx’s tri-state area contractors with decades of tenure are quitting. WCPO 9 News found routes for sale in Cincinnati and northern Kentucky.
FedEx responded in a statement:
“FedEx Ground’s entrepreneurial business model includes more than 6,000 service provider companies, which averaged $2.3 million in revenue last year,” the statement said. “More than half of these companies have provided service to FedEx Ground for five or more years, growing and scaling their businesses alongside FedEx Ground as we jointly explore the opportunities presented by the rapid growth of e-commerce. We recognize Changing market dynamics and economic conditions can pose new challenges for service 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 company’s geographic service area, we have found that the most effective solutions are identified through a direct engagement with each independent business FedEx Ground teams across the network continue these productive B2B discussions.
“In my case and many other contractors, those requests were denied outright,” Patton said.
The local contractors declined to speak on camera, but expressed support for a letter Patton wrote on their behalf asking FedEx for better compensation. Without it, FedEx Ground deliveries may 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 on to customers: the fuel surcharges that they’ve passed on to customers and pass them on to us because we’re actually those who use the fuel,” Patton said. “There is no future for FedEx Ground without its contractors. So something is going to break here.”
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