Dave Rebholz on California Ultimatum - September 21, 2007

So, how many FedEx Ground managers really knew what was coming down the pike in California?  Not all of them.  And some of them are talking to us.  Here's what Dave Rebholz sent around yesterday

GROUNDNEWS/CORP/FXG
09/20/2007 12:11 PM


To

cc

Subject An important message from Dave Rebholz

We have some important news and I wanted to make sure you heard it from me first. For more than 20 years, this company and its independent contractors have formed a powerful competitive alliance that has clearly made its mark on the ground, small package delivery industry.

We strongly believe in the effectiveness of independent contractors and are vigorously defending our business model in the state of California. That said, in the face of growing legal and regulatory uncertainty, we must take further steps to strengthen our ability to continue operating with contractors in that state. Therefore, FedEx Ground is announcing today its goal of serving California customers exclusively through multiple work area contractors by fiscal year end May 31, 2008. Contractors with multiple vehicles and drivers on the road every day have greater flexibility in providing the high level of customer service expected from the FedEx Ground network.

In addition, we will no longer renew California single work area contracts as they expire. After exploring every available option, weʼve concluded that transitioning to an all multiple work area contractor workforce in California is the right thing to do.

We realize that being a multiple route business owner may not be for everyone. So, for those California-based single route contractors who donʼt wish to expand their business to operate multiple routes, they will be offered voluntary transition incentives to facilitate the sale or transfer of their routes and special support for disposition of their vehicles.

We firmly believe that the independent contractor model at FedEx Ground is a mutually beneficial relationship and we will continue to invest in improving and strengthening the contractor network.

Dave Rebholz
President and CEO

"Uncertainty."  Fred Smith said it to Wall Street analysts yesterday.  Dave Rebholz clings to that word too.  To them it sounds so much better than "losing."

But this whole kick in the teeth to "contractors" and "FedEx business partners" in California is both in response to uncertainty and is meant to create uncertainty. What this offer means to each driver in California is different based on each person's situation.  This ultimatum in California and the 30 day timeline is intended to cause as much uncertainty to those drivers as possible.  All those California folks need to get legal advice before signing anything or deciding to sell, buy or transfer anything.

FedEx obviously thought long and hard and planned for this.  Be smart about your reaction to it.