FedEx Ground Moving Via Express?

[Brown287]

Actually its a national account that was lost out of Chicago. So much for being a good Union town! The drop box is right next to my box so I see it every day and have daily conversations with the Express driver since we both have 4:30 pickups. Its a colledge bookstore that we also both deliver to, so the Express driver and I have talked about this issue in great length. The Express driver himself has explained to the manager of the store that NO GROUND packages are allowed in the drop box and she has explained that Fed-Ex has said that she could. Heck if I knew who to contact about this clear violation I would. I dont begrudge either the Ground driver or the Express driver but this is a clear example of how Fed-Ex takes no laws seriouslly.

 

[59 Dano]

Digging up an old post to clarify some good points that were raised....

The more and more it gets out that Ground and Express have "ties", the less and less Fred will be able to keep arguing that they are completely separate operating companies that should have different rules attached to each regarding the status of employees (or those who just happen to wear a FedEx uniform, but aren't "officially" employees).

Express and Ground can have as many "ties" as they want with each other without issue. Of course, that's dependent upon what those ties actually are and what they accomplish.

Fred's plans include the integration of Express and Ground to the extent where Ground will someday soon start delivering non-overnight Express volume. This will be pulled off with a changing of money from one pocket of FedEx Corporation to the other. Express will "pay" a fee per piece that is transferred to Ground for delivery, and Ground will receive that fee to cover their costs of making said delivery. From the stand point of the "separate" operating companies (Express and Ground), it will be a payment for service provided by another "company". From the perspective of FedEx Corporation, it will be a movement of funds under the Express ledger, over to the Ground ledger. FedEx keeps all the money under its name, and is able to get delivery accomplished with the lower cost structure of Ground. Fred-o-nomics at work.

There's a big problem with this (back to those "ties"!).

If Ground is paying Express to fly packages, that's not much of an issue so long as it's being done properly. By that, I mean that Express is providing a service to Ground that Ground can't provide for itself. Also, it assumes that Express is invoicing Ground whatever the fee is, and Ground is remitting that amount to Express, and both are properly recording the transactions.

The scenario that you present is a different story.

Pulling the ol' switcheroo like that could get FDX in all sorts of trouble and would crush any hopes of future RLA classifications. Using Ground trucks to deliver Express freight --even though the fees have been paid from one division to the other-- when you've got Express trucks that are to be used for that purpose is an invitation for a headache.

From the legal, regulatory, and legislative perspectives, it doesn't pass the smell test. While they may be operating as "separate" companies and jumping through the relevant hoops, there comes a point when it's hard to separate one from the other -- especially when one is doing the job that the other is also doing.

It is of course legal, but it does raise issues about the supposed independent operation of each company under FedEx Corporation. When the cooperation between companies under a master corporation is this close, it does create issues with perception and the politics of having both the RLA and IC model operating at the same time. No one but Fred would even dream of trying to pull off such a charade, but it looks like he may just pull it off.

IMO, the most compelling reason that that wouldn't happen is the RLA. Technically, they'd be doing everything right, but hiring their own ground subsidiary to deliver packages from their own air subsidiary (which already has a dedicated fleet of trucks for that purpose) would be suicide.

Even though I think politicians are the most stupid class of people in the country, I think they're capable of recognizing something that so blatanly flouts the spirit of the rules.

Also, thank you for making a well-thought out post.

 

[Ricochet1a]

Pulling the ol' switcheroo like that could get FDX in all sorts of trouble and would crush any hopes of future RLA classifications. Using Ground trucks to deliver Express freight --even though the fees have been paid from one division to the other-- when you've got Express trucks that are to be used for that purpose is an invitation for a headache.

From the legal, regulatory, and legislative perspectives, it doesn't pass the smell test. While they may be operating as "separate" companies and jumping through the relevant hoops, there comes a point when it's hard to separate one from the other -- especially when one is doing the job that the other is also doing.



IMO, the most compelling reason that that wouldn't happen is the RLA. Technically, they'd be doing everything right, but hiring their own ground subsidiary to deliver packages from their own air subsidiary (which already has a dedicated fleet of trucks for that purpose) would be suicide.

If FedEx tried to contract out the delivery of OVERNIGHT packages, then there may be some issues. Remember, FedEx's RLA classification isn't due to a court decision, it is due to a piece of legislation, the Railway Labor Act. Express has maintained that classification due to three reasons: 1) It has aircraft, 2) Other "airlines" are classified under RLA, 3) FedEx has enough of Congress in its pocket.

The Express equipment will be used to deliver overnight volume. There will be the same number of routes, and virtually the same number of Couriers. What will change is that the Couriers will be shifted from an overwhelming full time force to a near complete part-time force. Labor cost will decrease and FedEx's risk of having it Courier force unionizing will virtually disappear.

FedEx has already proven to itself that it can skirt the intent of the law with the IC model at Ground. It keeps on making the necesary tweaks to it operating practices at Ground to stay one step ahead of any court decision. Throwing the delivery of Express non-overnight volume to Ground isn't any earthshattering development. It is merely the use of a cartage agent to deliver packages. This is done all the time the world over and DHL uses that to deliver international volume within the US quite often now.

The FAA only gets involved in the air cargo arena from the moment the package is tendered to the moment the package makes it to the destination airport. Once the package leaves its destination airport, the FAA is out of the picture - the package becomes just another piece of road revenue that the DOT regulates, but NOT the FAA. This is the perfect opening for FedEx to "transfer custody" of non-overnight volume to Ground and have them complete the final movement of the volume. From the FAA or DOT's perspective, nothing is happening. From an Express fulltime Courier perspective, it is the end of their career.

As far as passing the "smell test", that was passed a a while back. Ground is already offering next day service to extended areas - performing "express" deliveries. What Ground and Express do is indistinguishable with the sole exception that Express is classified as an airline by the FAA due to its ownership of an air cargo fleet - that's it.

You can't point to anything which specifically prohibits FedEx from doing this. This is the key. As long as the law doesn't specifically prohibit an action, anything else is considered fair game. AGFS will still be strictly Express employees. DGO will deliver all of the overnight volume. DGO will still pickup ALL volume that could potentially move by aircraft. There is no conflct with any FAA regulation and certainly not with any provision of the Railway Labor Act which was written long before FedEx even existed.

When one flies the journey is regulated by the FAA in the US. Once one hits the curb of the airport and gets into a taxi for the final leg of travel, the FAA isn't concerned with the "journey" anymore. This is what will change. Instead of "United airlines" flying you to your destination airport and then driving you to your hotel or residence in a "United" shuttle bus, "United" will hand off your transportation to a third party at the airport for final "delivery". The fact that the third party is in fact owned by the same holding corportation is irrelevant. They maintain the "separate operating company" pretense, therefore no legal issues present themselves.

Finally, this isn't just speculation on my part. It is a scenario that has been relayed to me over the past 18 months as being the FedEx "master plan" regarding the transformation of Express to keep it union free and with lower labor costs than UPS. The changes are already happening. They are slow and in many cases obscured with confused reasoning or outright lies to Express employees. When the "switch is flipped", the majority of Express employees won't realize what happened to them. They will be forced into performing their delivery route in a few short hours, then forced into an extended unpaid break until they start a PM pickup route. Most won't put up with this and will gradually retire or quit. This is precisely what Express will want. The Courier force will be gradually transformed from a full time, high experience (and from FedEx's viewpoint, over paid), force to a part-time, low compensation force that won't bother with unionization since they are transient in their employment with FedEx.

 

[MrFedEx]

Your scenario is certainly possible. But what happens if Ground isn't able to beat the court system and they become employees? Wouldn't that negate the savings advantage for dear old Fred? Also, if Express shifts XS and E2 volume over to Ground, won't those semi-premium products suffer given the low emphasis on service by Ground? I can envision a lot of shippers switching back to UPS in order to at least get it within a few days of it's scheduled delivery date. The Ground guy would look at the commitment date and just blow it off.

I've heard similar talk from friends in management, but so far it's just talk. One of them insists that "major changes" are coming within the year, but that could mean almost anything. Good post.

 

[bbsam]

Gee, Ricochet. When I say the same things, I'm a "purple kool-aid drinker". When you say it, it's "good post". Really, I bathe every day too. Honest.

 

[MrFedEx]

Gee, Ricochet. When I say the same things, I'm a "purple kool-aid drinker". When you say it, it's "good post". Really, I bathe every day too. Honest.

You always assume the Ground model will survive. I've given you kudos for some of your posts too. Also, Ricochet is clearly familiar with the way Express operates and the way management tends to think. Your perspective is only from the Ground side.

 

[Ricochet1a]

Your scenario is certainly possible. But what happens if Ground isn't able to beat the court system and they become employees? Wouldn't that negate the savings advantage for dear old Fred? Also, if Express shifts XS and E2 volume over to Ground, won't those semi-premium products suffer given the low emphasis on service by Ground? I can envision a lot of shippers switching back to UPS in order to at least get it within a few days of it's scheduled delivery date. The Ground guy would look at the commitment date and just blow it off.

I've heard similar talk from friends in management, but so far it's just talk. One of them insists that "major changes" are coming within the year, but that could mean almost anything. Good post.

Realistically, it would take a massive class action suit to be recognized by the courts to even have a chance of getting Ground's business model yanked. Let's say Ground did in fact get their business model reversed by court decision, would Ground's labor costs exceed Express' after that??? From everything I've heard regarding the contingency plans, FedEx doesn't believe that they'd have to pay Ground drivers any more than they are paying Express Couriers right now. So that wouldn't be an issue.

Regarding the "semi-premium" services... FedEx is currently operating with a schizophrenic business approach between Ground and Express. The differences between the two are being narrowed each year in regards to service levels. If one looks back 3 or 4 years ago and compares the differences between Express and Ground, then looks at what is going on today, the gap is narrowing. It isn't because the quality of Ground is improving, it is due to the fact that the quality of Express' new hires is declining rapidly. With stagnant wages and a gutted retirement plan, new hires quickly learn that Express isn't the place to make a career any more, so they hit the door once other options make themselves available.

Regarding committment times... 2nd and 3rd Day are late afternoon commit times. If Ground and Home Delivery can't make 4:30PM committment times, FedEx would definately be in trouble. Right now they couldn't pull it off; in another couple of years, they'll be able. With the transferral of non-overnight volumes to Ground, IC's like bbsam will be expanding 20-30% to have the coverage to meet committment times for volume transferred to Ground. If Ground was to treat the transferred Express volume as Express treats P1, then they'd pull it off easy.

We know that many Express customers want the extra service level. As long as they continue to ship overnight, they'll get it from pickup to delivery. For those customers who want to save a few bucks, they'll get their shipments delivered by a different person. The residential customers won't even notice. The business customers will learn to expect that paying less gets less.

I know this isn't cheerful news, but it is the coming future of Express. I've had people that don't have any other sources of information state that, "this could never happen...". I ask them why and the only response I get is a misinformed rationalization that Express can't do that because either the law wouldn't allow it or customers would get too confused. There is no legal requirement for Express to deliver its volume with Express employees and customers are already confused with the multiple FedEx trucks and deliveries.

The "problem issue" I see is one of communication with Ground drivers. We all know that we get constant calls for reattempts or ETAs for delivery so that customers don't have to wait. With the current structure, FedEx couldn't have a dispatch system for Ground as they do with Express. This would cause some customers to complain that they can't get their shipments when they want them or have difficulty in meeting up with the individual that is delivering the package. I've been told that FedEx intends to deliberately cut the service level on non-overnight volume so this isn't an issue. If customers ship non-overnight, then no special service; they'll get it delivered when it is due and nothing more. Want the service, ship overnight and Express will wipe your nose for you when we deliver the package.

Supposedly this is also going to help "bridge the gap" between Ground and Express in customers eyes. If Ground is delivering both their own volume and non-overnight Express volume, more customers will be tempted to use Ground for non critical shipments - or so I've been told.

The time horizon for this 2 to 4 years from what I've been told. The biggest delay is that FedEx does indeed want to make sure that its IC model isn't going to get yanked in the near future. Express also needs to fully implement the ROADS system to ensure that Couriers aren't needed on the AM sorts and inexperienced Couriers can perform routes with minimal assistance. We all know that the capital expendatures of FedEx have been going primarily into Ground with the exception of aircraft and technology (ROADS). Spending at ramps and stations for equipment has been under a strangle hold for quite some time now. This is going to continue for some time.

To those that doubt, look around your operating location. Look at the turnover over the past 3 years compared to the years prior. Look at the capital expendatures in the past couple of years compared to years prior. Look at compensation levels the past 2 years compared to years past. In FedEx's proxy statement for the impending shareholder meeting, they stress the need to offer competitive pay for FedEx's executives. Has there been any such communication made regarding the compensation for non-executives? Does FedEx "compete" on the basis of compensation for your efforts?

There is only one way for FedEx employees to have a say in this impending course of events. Unionization. There is no other alternative for the Couriers that wish to remain as full time employees. You can engage in wishful thinking and rationalizations that FedEx isn't in fact changing, or you can make a decision to attempt to protect the career that you have chosen and ahve given up other opportunities for. For those in their twenties, you have other options for a career. For those in their 30's or 40's, your options become fewer each year.

Some of us have already made the decision to leave. I see it as the "Titanic", slowly sinking with many still thinking that all will be well. Maybe there will be a rescue ship arrive in time to take you off before you take an ice water swim (HMS Teamsters). I don't think that will happen. To continue the analogy, I've been in the lifeboat for a couple of years now, rowing away waiting for eventual rescue - tossing out lifevests to those who will listen. For those who have chosen to remain on the Titanic, I really hope the HMS Teamsters do arrive in time; but I really don't think that will happen in time. Fred is slowly letting in the water on career prospects for Express Couriers, and sadly most don't realize it. When the Titanic does begin the plunge, I fear many of the passengers will be left wondering why they didn't act sooner. When one is taking an ice water swim, it is too late.

 

[Slobberman]

Some of us have already made the decision to leave. I see it as the "Titanic", slowly sinking with many still thinking that all will be well. Maybe there will be a rescue ship arrive in time to take you off before you take an ice water swim (HMS Teamsters). I don't think that will happen. To continue the analogy, I've been in the lifeboat for a couple of years now, rowing away waiting for eventual rescue - tossing out lifevests to those who will listen. For those who have chosen to remain on the Titanic, I really hope the HMS Teamsters do arrive in time; but I really don't think that will happen in time. Fred is slowly letting in the water on career prospects for Express Couriers, and sadly most don't realize it. When the Titanic does begin the plunge, I fear many of the passengers will be left wondering why they didn't act sooner. When one is taking an ice water swim, it is too late.

Excellent post!I am new to this forum and i im right now taking this all in.Indeed Fedex is a sinking ship.Fox news did a story on Fedex just yesterday showing that profits are down a whopping 53% at Fedex.It is only a matter of time now.

 

[Ricochet1a]

Excellent post!I am new to this forum and i im right now taking this all in.Indeed Fedex is a sinking ship.Fox news did a story on Fedex just yesterday showing that profits are down a whopping 53% at Fedex.It is only a matter of time now.

By sinking ship, my analogy was referring to the career prospects of full time Couriers. Excluding the Kinkos write offs that FedEx used in the past couple of years to artificially reduce its profitiability, FedEx is doing remarkably well considering the state of the economy. Check the graph of FedEx stock price since March of this year. A large part of this is due to the fact that all FedEx employees below executive level took it in the shorts with the pay freeze and halting of 401k matching funds.

The career hourly employees are taking on the burden of maintaining FedEx's profitability right now. This is in direct opposition to the former PSP philosophy. The shareholders were supposed to take it in the shorts before the employees. It is reversed. FedEx is making up all the ground it lost in its stock price and by the end of the current fiscal year, it will most likely be back to where it was in 2007. I'm still waiting for my "thank you" letter from Fred for taking it in the shorts for the sake of the shareholders.

Time for a fresh change of shorts.

 

[59 Dano]

FedEx has already proven to itself that it can skirt the intent of the law with the IC model at Ground. It keeps on making the necesary tweaks to it operating practices at Ground to stay one step ahead of any court decision. Throwing the delivery of Express non-overnight volume to Ground isn't any earthshattering development. It is merely the use of a cartage agent to deliver packages. This is done all the time the world over and DHL uses that to deliver international volume within the US quite often now.

The FAA only gets involved in the air cargo arena from the moment the package is tendered to the moment the package makes it to the destination airport. Once the package leaves its destination airport, the FAA is out of the picture - the package becomes just another piece of road revenue that the DOT regulates, but NOT the FAA. This is the perfect opening for FedEx to "transfer custody" of non-overnight volume to Ground and have them complete the final movement of the volume. From the FAA or DOT's perspective, nothing is happening. From an Express fulltime Courier perspective, it is the end of their career.

From the perspective of Congress, and likely the court system were it ever to make it that far, it's an obvious skirting of the spirit (if not the letter, not that I've read it) of the RLA.

As far as passing the "smell test", that was passed a a while back. Ground is already offering next day service to extended areas - performing "express" deliveries. What Ground and Express do is indistinguishable with the sole exception that Express is classified as an airline by the FAA due to its ownership of an air cargo fleet - that's it.

You can't point to anything which specifically prohibits FedEx from doing this. This is the key. As long as the law doesn't specifically prohibit an action, anything else is considered fair game. AGFS will still be strictly Express employees. DGO will deliver all of the overnight volume. DGO will still pickup ALL volume that could potentially move by aircraft. There is no conflct with any FAA regulation and certainly not with any provision of the Railway Labor Act which was written long before FedEx even existed.

None of that matters. What matters is would the people who vote on RLA authorization recognize it for what it is. I say they would and they wouldn't reauthorize RLA status. If FedEx was a vertically integrated company, it'd be a completely different story, but it isn't.

They could spin it however they wanted, but it'd still be the co-mingling of Ground and Express that isn't quite consistent with the intent of the RLA. It's not a good idea for a company like FedEx to try and operate as if it's vertically integrated when it's not because it never quite works out.

On top of that, there are issues that would present problems in various other areas of the law.

When one flies the journey is regulated by the FAA in the US. Once one hits the curb of the airport and gets into a taxi for the final leg of travel, the FAA isn't concerned with the "journey" anymore. This is what will change. Instead of "United airlines" flying you to your destination airport and then driving you to your hotel or residence in a "United" shuttle bus, "United" will hand off your transportation to a third party at the airport for final "delivery". The fact that the third party is in fact owned by the same holding corportation is irrelevant. They maintain the "separate operating company" pretense, therefore no legal issues present themselves.

Again, none of that is even remotely relevant as far as "legal issues" or the FAA is concerned. Congress determines RLA status. Hardly anyone in Congress cares about any of that above-mentioned stuff anyway, not that many of them would even understand it. What Congress is going to look at, should the situation arise, is whether FedEx is abusing or misusing its status. In that situation, the answer is YES.

Finally, this isn't just speculation on my part. It is a scenario that has been relayed to me over the past 18 months as being the FedEx "master plan" regarding the transformation of Express to keep it union free and with lower labor costs than UPS. The changes are already happening. They are slow and in many cases obscured with confused reasoning or outright lies to Express employees. When the "switch is flipped", the majority of Express employees won't realize what happened to them. They will be forced into performing their delivery route in a few short hours, then forced into an extended unpaid break until they start a PM pickup route. Most won't put up with this and will gradually retire or quit. This is precisely what Express will want. The Courier force will be gradually transformed from a full time, high experience (and from FedEx's viewpoint, over paid), force to a part-time, low compensation force that won't bother with unionization since they are transient in their employment with FedEx.

What are they waiting on, then? They're losing money ever day that they put this off.