Part of the disinformation that FedEx is putting on their brown bailout site is that having the RLA classification pulled, would result in a “package tax”. Fred gets real creative with his math. Using FedEx’s own numbers, FedEx had $22.4 BILLION in revenue FY 08 and moves an average daily volume of 3.4 million packages. On one of the PDF’s linked to his propaganda site, he has the following paragraph:
· “So how much will this cost the consumer? Estimates vary, but a mere 10 percent increase would mean a more than $5 billion “hidden package tax” to shipping companies and consumers. Prices would go up, just when our economy needs a break.
He uses the plural “shipping companies”, so he tries to cover his base there. But there is a problem, a big one. If FedEx loses its RLA classification UPS rates won’t go up at all, since they already pay union wages. Doh!!! DHL is out of the US domestic market. So using Fred’s estimate of needing a 10% increase in his revenue to cover the cost of a union (which is about double what he would really need), take the $22.4 BILLION figure and multiply that by 10%. I keep on getting $2.24 BILLION no matter how hard I try to get his $5 BILLION figure. So we caught Fred in a bit of a fib…
Now let’s use some real numbers. FedEx employs both full and part-time employees. The Courier and RTD jobs are predominantly filled with full time employees (right now). If we use what FedEx calls “full-time equivalents”, we can use a figure of approximately 35,000 FTE employees in the US. Bringing back the defined benefit pension plan, getting back to a reasonable top-out time and bumping up the wage rate slightly would cost about $20,000 annually per FTE (bringing up the average FTE compensation per year up from the mid $40’s to the mid $60’s). Let’s do some “real” math. 35,000 times $20,000 gets me $700 million every time. This would be $700 million a year in additional labor expense for Fred, out of annual revenues of $22.4 BILLION (FY08). Put another way, it would cost FedEx an additional 3.125% to their rate schedule to cover the expense. This assumes that Fred doesn’t change the executive compensation, doesn’t cut the dead weight in the corporate headquarters, or makes any other sensible changes to the business model. If anyone has any current “hard” numbers for the number of Couriers and RTD’s employed, please post them, I’m working off memory on the numbers of employees in these classifications.
To further illustrate how out of touch FedEx management is, look at the Kinko’s debacle. Kinko’s was acquired in 2004 for around $2.4 BILLION. Almost two-thirds of that has been written off as a loss since the acquisition. Latest losses related to the Kinko’s acquisition are in the neighborhood of $1.6 BILLION, and rising every month. Fred’s decision to purchase Kinko’s has cost FedEx $1.6 BILLION, and they haven’t even had a vote of no-confidence on the board (because the board is packed with his cronies).
Let’s use Fred’s worst nightmare, and assume he has to buy off the union with wages and benefits that match UPS’s. UPS drivers receive a compensation package worth a little over $90,000 a year in wages, benefits and pension. That is almost double the average FedEx Courier/RTD. Let’s use a figure of an additional $40,000 a year per FTE in compensation as a result of the union. $40,000 times 35,000 FTE gets me $1.4 BILLION a year in additional labor expense. That works out to precisely a 6.25% increase in the rate schedule to cover the labor expense, NOT the 10% he was talking about.
Here is where he gets that 10% figure. If he has to pay near equivalent compensation rates to his Couriers/RTD’s as UPS pays their drivers AND he has to restore the pension plan to ALL salaried employees AND he has to bring up salaried employees compensation up a bit to restore the differential in compensation between hourly and “professional” employees, he may just approach that 10% figure. In other words, Fred would lose his built in 10% cost structure advantage over UPS if he had to pay equivalent wages and compensation across all levels. That 10% is his annual profit goal. He’d have to make changes to the rate schedule, eliminate the fat in the headquarters and dramatically reduce executive compensation to get back to the profit margin as a percentage of revenue that he wants.
Working the numbers, and using FedEx’s own figures and propaganda, one can see what Fred fears. FedEx believes that the worse case scenario is looming, and they will have to pay UPS equivalent compensation across the board within a year.
As far as cutting OT and increasing stops per hour year again… It begs the questions… If we need/can have additional stops per hour now; it means that by default Couriers were screwing around in the past (don’t’ think so). If we have lower package volumes and are covering a greater geographical area per route as a result of condensing routes; it means that by default we should have fewer stops per hour (increased distance between stops means fewer stops per hour). Nope.
All they can see is that their cost per delivery is increasing when they look at the spreadsheets and the solution they see is to crack the whip and make us try to go even faster. We are actually going faster than we ever have. But it has a cost; we are spending less and less time with the customers. We perform a resi release on packages before we even leave the truck (don’t even bother to get a signature anymore). We rush our business customers to sign the power pad (even to the point of shoving it into their face), so we can get back in the truck and keep the pace up. Service is dropping, so we can try to keep up with the ever increasing stops per hour goal. By the way, weren’t stops per hour removed as part of the performance review? It is supposed to be scan compliance, safety, station work performance attendance and punctuality, isn’t it? Another FedEx falsehood in the making???
Fred must see Armageddon if he is this scared. Means the info I received regarding the SFA being a disaster for FedEx must’ve been true. Keep on feeding out the rope, and Fred will hang himself.
This tells me the momentum is with the employees. I’d be happy with getting the pension back, a 4 year top out, guarantees to preserve full time positions, some moderate increase in the pay scales (not expecting UPS wages), and possibly a reduction in the insurance premium. For a first contract this would be a big achievement. In later contracts, a gradual trend towards narrowing the gap with UPS would be a goal. What I’d like to see for a first contract is entirely achievable for FedEx without throwing them into bankruptcy (a cost to FedEx of 3.5 to 5% of their annual revenues). With some sensible changes to the business model, a very slight increase to the rate schedule and a corporate review of over-time expenses, this modest increase in expense could be covered and preserve profits at the same time.