FedEx Might Not Be Able to Deliver Your Holiday Packages—Here's Why
The shipping company is facing some concerning hurdles that could affect future deliveries.
Whether you're buying gifts for your loved ones or looking to cash in on Cyber Monday deals for yourself, the upcoming holiday shopping season is sure to be a busy one—and that means packages galore. Last year, 3.4 billion packages were estimated to ship between Black Friday and Christmas. But if you're already thinking ahead, you should make sure you're following the struggles of one popular shipping company. FedEx is now experiencing issues with at least one of its major contractors—and as a result, consumers could face the consequences. Read on to find out why FedEx might not be able to deliver your holiday packages.
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FedEx workers have warned that they're struggling.
FedEx uses a network of 6,000 independent businesses to make deliveries with its Ground division, according to CNN. These FedEx Ground drivers delivering packages to Americans' doorsteps are actually employed by that network of contractors, not by FedEx itself. For months now, the contractors have been sounding the alarm on major financial concerns. An estimate from Deutsche Bank indicates that higher costs for fuel, trucks, and driver pay amid inflation have roughly 30 percent of the FedEx contractors losing money, per CNN.
"My business is losing money every day," Spencer Patton, the owner of Patton Logistics, which runs about 275 FedEx Ground delivery routes in 10 states, told the news outlet.
Customers might have their holiday packages affected as a result.
While the controversy between FedEx and its contractors might not seem like an issue for consumers to worry about, it could affect them soon. Patton, who is one of FedEx's largest contractors and has been one of the most vocal critics of the shipping company, has threatened to halt holiday deliveries because of this problem. "My business will not be able to continue operation past Nov. 25," Patton told CNN. Nov. 25 is, notably, Black Friday. "Peak season is one of highest cost of operations time of the year."
According to the news outlet, Patton's company deliveries around 6.5 million FedEx packages last year alone. Patton said the wages he needs to keep his drivers are more than 37 percent higher this year, while truck prices are up by 30 percent. With inflation, AAA reports that the average price of diesel fuel for these trucks is also 52 percent higher than last year.
"Fuel prices have come down off a boil, and that undoubtedly has been a benefit. But wage pressures remains boiling hot," Patton said. "We are actually competing against FedEx for drivers."
Patton has failed to reach a compromise with FedEx.
Patton has been seeking to renegotiate his contact to ease the cost-inflation struggles financially impacting his company right now, FreightWaves explained. But the Patton Logistics owner said that FedEx has repeatedly denied his company's requests for renegotiation, and that many other contractors seeking renegotiation have either been ignored or denied.
Without FedEx's cooperation, holiday shipping could be in danger. Patton told CNN that ahead of the season, he will "have to double the number of trucks, [and] hire drivers" in order to meet demands. However, "I will not do so if things don't change," he said.
FedEx has responded by suing Patton.
FedEx responded by filing a lawsuit against Patton in a federal court in Tennessee on Aug. 26, Bloomberg reported. According to the news outlet, FedEx claims that Patton is "creating a fictionalized crisis" between the shipping company and its contractors in order to promote his own business. Patton also operates Route Consultant, which provides consulting and other services to FedEx's contractors, and FedEx is alleging in its lawsuit that he is attempting to get "large numbers" of independent service contractors to renegotiate their deals with the company to drive business to his consulting firm.
"While the current economy is a challenge for all businesses, the reality is that [FedEx Ground's] service providers earn average annual revenue of approximately $2.3 million dollars, a figure that has doubled over the last four years," the company said in its suit.
FedEx also said that only around 10 percent of independent contractors "have sought mid-contract negotiations" for agreements in 2022, "contrary to Mr. Patton's false or misleading claims about the number of service providers that [are] purportedly in financial distress." FedEx said it has approved 40 percent of renegotiation requests since July 2022 and more than 90 percent have led to new term agreements.