Shipping giant FedEx has announced more changes after the company said it would merge two of its largest businesses — its Ground unit and the Express business — also signaling a possible future of more contractor reliance.
The company's Ground line relies on contractors — delivery drivers that aren't on the company's payroll — to move parcels. FedEx's Express line has traditionally only used drivers that are on staff and on the company's payroll.
During a recent investor call, the company announced that it plans to go to a "hybrid" model using a mix of employees and contractors in the new combined business. The company's Ground unit brought significant cost savings by using contractors in that model.
FedEx, which was built around its Express line in the early era of the company, is now faced with the possibility of causing significant job losses if it chooses to rely heavily or completely on contractors to deliver express packages as well as for its slower Ground service.
Analysts say with the contractor model potentially offering a marked labor-cost benefit, the company could possibly lean more towards complete reliance on contractors to execute deliveries.
Last year, FedEx said it would be focusing on more profitable deliveries, and has recently said it plans to prioritize shareholder value over a growth mindset.
The company's CEO Raj Subramaniam said, "We are at a pivotal moment in the history of FedEx as we enter our 50th year."
Last summer, contractors levied some of the biggest demands at FedEx in recent years, aimed at the way the company handles its business with non-payroll workers.
Spencer Patton, who headed up over 200 contractor routes in multiple states for the company's Ground business, demanded an increase in payments by 50 cents per stop and 20 cents per mile.
He said in a video at the time, "The FedEx Ground network is in far more peril than what anyone realizes."
FedEx Founder Fred Smith To Step Down As CEO
Raj Subramaniam will take over as FedEx CEO and president when Smith steps down in June. Smith will still stay with the company as executive chairman.
