Ricochet1a
Well-Known Member
https://web.archive.org/web/2010082...nation-or-fairness-shipping-giants-square-in/
Well, there is a benefit on having a Ground owner posting on here....
Yes, things are a moving in Memphis. Everything is still be kept under hat, but the catalyst was the change in the RLA rules definitions regarding a 50% majority.
Reading the articles I linked, one can fill in many of the missing pieces - though not all.
FedEx is going to beef up the Ground contractor model to weather any potential litigation against it. By eliminating sole proprietorships and the limited liability corps and partnerships, FedEx is attempting to close the last remaining loopholes which could result in its being found to be the employer of Ground drivers and not the "owners" of the routes.
There are BIG implications in how FedEx compensates Ground contractors which are in play here. LLC, LLP and sole proprietorships aren't double taxed - they are only taxed on earnings that are distributed to partners. This means that the current compensation model of Ground will have to change, since many contractors which are barely making it through only being taxed once, will now be forced to pay corporate taxes on their profits. This means that FedEx is going to have to up its payments to the owners in order for them to maintain the same level of relative profitability. Translation, this move is going to cost FedEx some rather large bucks. This tells one that FedEx isn't doing this lightly, they have serious strategic reasons for taking on this additional expense.
For those that are already incorporated, this will mean that their net profitability will increase. For those that are operating with one of the limited liability models, their "in-pocket" profit margin should remain the same, but their administrative overhead will increase substantially. The desire of FedEx is to have all owners incorporated, owning a fairly significant number of routes and operating with all of the "appearances" of a truly independent entity.
As a side note, one of the articles references the cost to deliver a piece for UPS and Ground. The difference is $1.25. I posted earlier how Ground drivers could be paid close to UPS wages if only FedEx increased rate charged on each piece by $1.00. So QED on that one.
The next part of this story is the contracts for the new aircraft. I've been told that the opt out clause only applies if Express loses its RLA classification, NOT if the definitions of what constitutes a majority vote are changed (administrative ruling). This means that Express may very well be in the situation of being on the hook for Boeing aircraft (which despite what people think, aren't optimal for FedEx, Airbus aircraft are), while having to deal with a successful organization effort by the Teamsters. It does look like Fred got out maneuvered by the NLRB on this one - thus why the relative silence out of Memphis regarding this critical change. The Boeing deal was the proverbial carrot to Congress to keep FedEx's status under RLA. The word is that Memphis feels the change in the definitions for certification was an end-run on the 'deal', so FedEx is looking to do damage control. Fred didn't get what he thought he was paying for it seems.
The economy isn't looking to tank, but it is looking anemic. There isn't going to be a spike in oil prices as occurred 2 years ago. The economic turmoil in Europe and the collapsing Euro is actually having the effect of keeping oil prices low. Despite the fact that oil prices are quoted in USD, with the decline in the Euro, the price per barrel has actually fallen slightly, showing more of a linkage between the Euro and the price per barrel that would otherwise be indicated. So FedEx isn't facing the "crisis" that it did two years ago due to energy prices.
The reason for the secret... well that is speculation right now. WSJ had the info Thursday it appears and posted their article regarding the changes Friday afternoon. There are definate implications for Express though. If what I'm hearing is correct, the "Master Plan" will be put into effect if the Teamsters manage to get a vote under the new definitions. Express is already making plans for a union vote later this year or early next year and wants to be in a position to minimize any impact this may have on its business model.
The Teamsters had better get cracking, because 6 months from now, there won't be full-time wage employees to unionize if Express keeps on moving like this. The wage employees also need to start moving and get talking to their Teamsters local to get cards signed to try to prevent what Express is covertly attempting.
Quoting out of the Commercial Appeal article:
"The Teamsters and UPS are out to get most FedEx Express workers shifted to a labor law that FedEx officials believe would jeopardize the company's famed reliability."
"If that were to happen, I can promise you that the board of directors of FedEx Corp. would reduce the amount that we invest in (FedEx Express) to the point where it was just purely a sustenance level," Smith said in a recent interview with The Commercial Appeal."
End Quote
It is already appearent that this has been happening for awhile for equipment in DGO.
Things to look for at Express: full-time vacancies not being filled or being filled with two part-timers, increasing use of rental vehicles - Express doesn't want to be stuck with new expensive equipment - reasons are obvious, increase use of video propaganda directed towards Express employees.
Ground: expansion of facilities, incentives to add new routes by the operators which are incorporated - CASH incentives, cash payments to operators for the purpose of providing some minimal level of benefits which satisfies the requirement for health care coverage by full-time employers. In general, an expansion of Ground operations.
FedEx is attempting to head off the impact of Express certifying a union, which Memphis now believes to be more likely than not.
Well, there is a benefit on having a Ground owner posting on here....
Yes, things are a moving in Memphis. Everything is still be kept under hat, but the catalyst was the change in the RLA rules definitions regarding a 50% majority.
Reading the articles I linked, one can fill in many of the missing pieces - though not all.
FedEx is going to beef up the Ground contractor model to weather any potential litigation against it. By eliminating sole proprietorships and the limited liability corps and partnerships, FedEx is attempting to close the last remaining loopholes which could result in its being found to be the employer of Ground drivers and not the "owners" of the routes.
There are BIG implications in how FedEx compensates Ground contractors which are in play here. LLC, LLP and sole proprietorships aren't double taxed - they are only taxed on earnings that are distributed to partners. This means that the current compensation model of Ground will have to change, since many contractors which are barely making it through only being taxed once, will now be forced to pay corporate taxes on their profits. This means that FedEx is going to have to up its payments to the owners in order for them to maintain the same level of relative profitability. Translation, this move is going to cost FedEx some rather large bucks. This tells one that FedEx isn't doing this lightly, they have serious strategic reasons for taking on this additional expense.
For those that are already incorporated, this will mean that their net profitability will increase. For those that are operating with one of the limited liability models, their "in-pocket" profit margin should remain the same, but their administrative overhead will increase substantially. The desire of FedEx is to have all owners incorporated, owning a fairly significant number of routes and operating with all of the "appearances" of a truly independent entity.
As a side note, one of the articles references the cost to deliver a piece for UPS and Ground. The difference is $1.25. I posted earlier how Ground drivers could be paid close to UPS wages if only FedEx increased rate charged on each piece by $1.00. So QED on that one.
The next part of this story is the contracts for the new aircraft. I've been told that the opt out clause only applies if Express loses its RLA classification, NOT if the definitions of what constitutes a majority vote are changed (administrative ruling). This means that Express may very well be in the situation of being on the hook for Boeing aircraft (which despite what people think, aren't optimal for FedEx, Airbus aircraft are), while having to deal with a successful organization effort by the Teamsters. It does look like Fred got out maneuvered by the NLRB on this one - thus why the relative silence out of Memphis regarding this critical change. The Boeing deal was the proverbial carrot to Congress to keep FedEx's status under RLA. The word is that Memphis feels the change in the definitions for certification was an end-run on the 'deal', so FedEx is looking to do damage control. Fred didn't get what he thought he was paying for it seems.
The economy isn't looking to tank, but it is looking anemic. There isn't going to be a spike in oil prices as occurred 2 years ago. The economic turmoil in Europe and the collapsing Euro is actually having the effect of keeping oil prices low. Despite the fact that oil prices are quoted in USD, with the decline in the Euro, the price per barrel has actually fallen slightly, showing more of a linkage between the Euro and the price per barrel that would otherwise be indicated. So FedEx isn't facing the "crisis" that it did two years ago due to energy prices.
The reason for the secret... well that is speculation right now. WSJ had the info Thursday it appears and posted their article regarding the changes Friday afternoon. There are definate implications for Express though. If what I'm hearing is correct, the "Master Plan" will be put into effect if the Teamsters manage to get a vote under the new definitions. Express is already making plans for a union vote later this year or early next year and wants to be in a position to minimize any impact this may have on its business model.
The Teamsters had better get cracking, because 6 months from now, there won't be full-time wage employees to unionize if Express keeps on moving like this. The wage employees also need to start moving and get talking to their Teamsters local to get cards signed to try to prevent what Express is covertly attempting.
Quoting out of the Commercial Appeal article:
"The Teamsters and UPS are out to get most FedEx Express workers shifted to a labor law that FedEx officials believe would jeopardize the company's famed reliability."
"If that were to happen, I can promise you that the board of directors of FedEx Corp. would reduce the amount that we invest in (FedEx Express) to the point where it was just purely a sustenance level," Smith said in a recent interview with The Commercial Appeal."
End Quote
It is already appearent that this has been happening for awhile for equipment in DGO.
Things to look for at Express: full-time vacancies not being filled or being filled with two part-timers, increasing use of rental vehicles - Express doesn't want to be stuck with new expensive equipment - reasons are obvious, increase use of video propaganda directed towards Express employees.
Ground: expansion of facilities, incentives to add new routes by the operators which are incorporated - CASH incentives, cash payments to operators for the purpose of providing some minimal level of benefits which satisfies the requirement for health care coverage by full-time employers. In general, an expansion of Ground operations.
FedEx is attempting to head off the impact of Express certifying a union, which Memphis now believes to be more likely than not.