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Hey Fred, Take Ownership of the Debacle
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<blockquote data-quote="Ricochet1a" data-source="post: 1112330" data-attributes="member: 22880"><p>Plug in ANY numbers you want. Number of hours worked to get off the packages isn't a variable in determining margin (given the use of a 'salary'). </p><p></p><p>If revenue and all costs EXCEPT labor are held constant - the labor cost for drivers increases by 50%, the final margin to Ground will drop - so significantly so that the margin per package will be lower than Express. (This is all assuming that Ground would have to increase 'payments' to the ICs - or would their margin 'eat it'?)</p><p></p><p>Even if your drivers are only worked 8 hours a day - it doesn't matter. It is a MACRO level analysis, not an IC level analysis. </p><p></p><p>If Ground drivers (company wide) were to have their compensation increased by 50% (bringing them to parity with Express Couriers), the final margin per package for Ground (assuming they 'juggled the numbers" to ensure IC margin is held constant) would decrease. You can use whatever numbers for illustration you want, but margin would fall so dramatically, that FedEx would seriously reconsider whether it would be worth it to be in the ground package movement segment. </p><p></p><p>If Ground were to lose use of the IC provisions through court action, FedEx would SERIOUSLY reconsider whether it would keep Ground in operation. FedEx knows damn well that if the IC model were to be thrown out, the drivers of Ground (now employees and not helpers of contractors), would be organized in a few months and FedEx would be looking at not only increased labor expense, but the specter of having a wage employee labor union within FedEx. FedEx simply WON'T allow that to happen to contaminate the rest of FedEx. Ground would be dropped like a hot potato. </p><p></p><p>UPS is able to 'pull it off' through economy of scale. FedEx Ground is able to pull it off through under compensated, misclassified labor. In the event that FedEx would lose its ability to use the IC provisions of labor law, Ground wouldn't be 'forced' out of business, but FedEx wouldn't tolerate a marginally profitable opco with organized labor in it - FedEx would drop it to preserve the other opcos.</p></blockquote><p></p>
[QUOTE="Ricochet1a, post: 1112330, member: 22880"] Plug in ANY numbers you want. Number of hours worked to get off the packages isn't a variable in determining margin (given the use of a 'salary'). If revenue and all costs EXCEPT labor are held constant - the labor cost for drivers increases by 50%, the final margin to Ground will drop - so significantly so that the margin per package will be lower than Express. (This is all assuming that Ground would have to increase 'payments' to the ICs - or would their margin 'eat it'?) Even if your drivers are only worked 8 hours a day - it doesn't matter. It is a MACRO level analysis, not an IC level analysis. If Ground drivers (company wide) were to have their compensation increased by 50% (bringing them to parity with Express Couriers), the final margin per package for Ground (assuming they 'juggled the numbers" to ensure IC margin is held constant) would decrease. You can use whatever numbers for illustration you want, but margin would fall so dramatically, that FedEx would seriously reconsider whether it would be worth it to be in the ground package movement segment. If Ground were to lose use of the IC provisions through court action, FedEx would SERIOUSLY reconsider whether it would keep Ground in operation. FedEx knows damn well that if the IC model were to be thrown out, the drivers of Ground (now employees and not helpers of contractors), would be organized in a few months and FedEx would be looking at not only increased labor expense, but the specter of having a wage employee labor union within FedEx. FedEx simply WON'T allow that to happen to contaminate the rest of FedEx. Ground would be dropped like a hot potato. UPS is able to 'pull it off' through economy of scale. FedEx Ground is able to pull it off through under compensated, misclassified labor. In the event that FedEx would lose its ability to use the IC provisions of labor law, Ground wouldn't be 'forced' out of business, but FedEx wouldn't tolerate a marginally profitable opco with organized labor in it - FedEx would drop it to preserve the other opcos. [/QUOTE]
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