Go Back  Airline Pilot Central Forums > Airline Pilot Forums > Cargo
Fred's Business Model in Jeopardy...McCain to the Rescue??? >

Fred's Business Model in Jeopardy...McCain to the Rescue???

Notices
Cargo Part 121 cargo airlines

Fred's Business Model in Jeopardy...McCain to the Rescue???

Old 08-25-2008, 03:34 PM
  #1  
Gets Weekends Off
Thread Starter
 
Joined APC: May 2006
Posts: 977
Default Fred's Business Model in Jeopardy...McCain to the Rescue???

This is going to be really interesting to follow this election year. We know how McCain is tied to Fred, and Obama is pro-union.

HOME - TwinCities.com

In driver lawsuit, FedEx stands to lose money, business model

New definition of 'employee' may work against nation's No.2 delivery service
By Laurence Viele Davidson and Bob Van Voris
Bloomberg News
Article Last Updated: 08/23/2008 03:15:41 AM CDT

FedEx Corp. tells its ground-service drivers when to work, what to charge customers and what kind of socks and shoes to wear, the workers say. Those who sued the company argue that makes them employees, not independent contractors.
As drivers in a nationwide lawsuit demand the federal pension benefits reserved for employees, FedEx founder and chief executive officer Fred Smith has a lot at stake. If a judge in Indiana decides the drivers are employees, they'll seek $1 billion in damages. Plus, it may force the company to overhaul or even throw out a business model that provides FedEx Ground a cost advantage over its biggest competitor, United Parcel Service Inc.

"The case does not look good for FedEx," said Michael Harper, a Boston University law professor who is writing the chapter on the definition of "employee" for the Restatement of Employment Law, a reference work to be published by the American Law Institute. "FedEx's legal position is much less appealing because these drivers are at the core of their business."

The dispute has opened FedEx up to a series of related legal responsibilities, including a potential pretax liability from unpaid payroll taxes of as much as $2.5 billion. With $1.1 billion in net income in fiscal 2008, the company declined to say whether it had set aside reserves to cover the possible damages or tax liability. Spokesman Maury Lane said FedEx follows generally accepted accounting principles in disclosing reserves. The bigger
problem for the second-largest U.S. package-delivery company may be how to overhaul the business model to make it compliant. Businesses that use contractors rather than employees enjoy an estimated cost savings of more than 30 percent, according to Marick Masters, a business professor at the University of Pittsburgh.

"It's a critical stage for FedEx Ground," said Richard Reibstein, a New York labor-law partner in the firm WolfBlock who isn't involved in the cases. "The amount at issue is extraordinarily high."

In March, the same Indiana judge ruled that workers in 20 states could sue as 20 individual groups to win employee status. Because those class actions and a nationwide suit involve so many drivers, anticipated rulings by the Indiana judge on whether the workers are misclassified pose the biggest threat to date to Smith's vision.

Smith, who has served as co-chair of U.S. Republican presidential candidate John McCain's campaign, was suggested in press reports as a potential running mate for McCain — a possibility the FedEx CEO rejected. Campaign spokesman Brian Rogers said the candidate had no comment on the litigation, which could help define what it means to be a full-time employee.

Treating workers as contractors rather than employees has been gaining popularity among U.S. employers, with the number in the work force rising 25 percent to about 10.3 million from 1999 to 2005, according to the Government Accountability Office. The reason for the increase is the cost differential, according to Masters, the business professor.
A Teamsters Union financial model predicts FedEx costs would go up $426 million a year if the company compensated the drivers as it does present employees. The model assumes FedEx would pay Social Security and Medicare taxes, unemployment and worker-compensation insurance, vacations, health insurance and 15 hours a week of overtime.
FedEx's Lane declined to comment on the Teamsters' model or Masters' 30 percent savings estimate, except to call both "speculative." He declined to say how much FedEx saves by using contractors.
FedEx describes the drivers as small-business owners who invest in their trucks and are free to hire helpers or substitutes.

"We've given that entrepreneurial opportunity to thousands of contractors to own, grow and expand their own business," Smith told investors in a Jan. 10 conference call. "That's what freedom is all about."
The company claims it doesn't prescribe the drivers' work methods or their days or hours of work, allowing them to pick up and deliver packages on their own schedules. Drivers are paid by the job, FedEx says.
"We do not think it's against the law to work for yourself," Lane said.


Pat Becker Jr., chief investment officer for FedEx investor Becker Capital Management Inc., said Smith, before converting the drivers to payroll workers, would revise the model, probably moving toward multiroute drivers as he had when FedEx lost a similar California class action demanding employee status.
Still, shifting to a multiroute model may not provide legal sanctuary. Employees of multiroute contractors are suing FedEx in Washington state, arguing they too should be eligible for overtime pay.
FedEx also is contesting an initial assessment in December by the Internal Revenue Service that the company owes $319 million in payroll taxes, fines and interest for 2002 because its drivers qualify as employees. The $2.5 billion in potential liability encompasses the worst-case scenario for three additional years being audited, Jon Langenfeld, an analyst at Robert W. Baird & Co., said in a January report.
The company argues that a 1994 settlement between the IRS and a company that FedEx subsequently bought classified the drivers as independent contractors and supports its business model. To add to Smith's troubles, he isn't getting much support from shareholders. Calculating from five years ago, before its court losses on the drivers' claims, FedEx's total stock return through Tuesday was 25 percent, compared with 11 percent for UPS, the world's biggest package-delivery company. Since U.S. District Judge Robert Miller in South Bend, Ind., certified the lawsuit Oct. 15, it's down 19 percent, lagging UPS' 13 percent decline.
Precontact is offline  
Old 08-25-2008, 03:47 PM
  #2  
With The Resistance
 
jungle's Avatar
 
Joined APC: Jan 2006
Position: Burning the Agitprop of the Apparat
Posts: 6,191
Default

"We know how McCain is tied to Fred, and Obama is pro-union. "
Precontact

Care to cite a reference proving either statement?

Here are the last 18 years of Fedex political contributions. Who is tied to what?

http://www.opensecrets.org/orgs/summ...?ID=D000000089

Last edited by jungle; 08-25-2008 at 04:14 PM.
jungle is offline  
Old 08-25-2008, 04:15 PM
  #3  
Gets Weekends Off
Thread Starter
 
Joined APC: May 2006
Posts: 977
Default

Sure, but I thought both were well known. No corporation is going to donate to just one political party. Especially corporations as large as ours are. But McCain is clearly close to Fred. And do you really think Obama's going to align himself anywhere else than o the side of your contarctors?

Smith/McCain Memphis Daily News - Presidential Hopeful McCain to Speak In Memphis
This was from April 2007

John McCain
When Republican presidential candidate John McCain addresses the Economic Club of Memphis next week, he'll bring to Memphis a campaign that already boasts several connections to the city.

For one thing, McCain - the Arizona senator who's one of a handful of contenders for the GOP's 2008 nomination - has enjoyed a long friendship with FedEx founder and CEO Frederick W. Smith. McCain's presidential exploratory committee was co-chaired by none other than Smith, a Vietnam veteran like McCain.

Back in 2002, Smith helped throw a party to mark the publication of a memoir McCain co-wrote, "Worth the Fighting For."

And on Monday, the Memphis business icon will introduce the senator at his lunchtime address, to be held at 12:15 p.m. in the ballroom of the Holiday Inn-University of Memphis at 3700 Central Ave

Obama/Unions Obama clear: He's pro-union :: CHICAGO SUN-TIMES :: Lynn Sweet

Obama Supports Pro-Worker Policies—and Union Members Support Obama
by AFL CIO for AFL-CIO July 25, 2008

by Seth Michaels, Jul 24, 2008

In his video introduction submitted to last year’s AFL-CIO Presidential Candidates Forum, Sen. Barack Obama laid out some of his personal history and connected it to why he’s running for president. It’s worth watching again now that he’s the Democratic presumptive presidential nominee. As he said:

I worked as a community organizer for a group of churches, helping to turn around neighborhoods that were devastated by the closing of steel plants. By bringing people together, we set up job-training and after-school programs, and we taught people to stand up to their government when it wasn’t standing up for them. That’s the kind of organizing we need today.

In the video, Obama said health care, good wages, a secure retirement and the freedom to form unions are at the heart of the change the country needs, and he’s continued to focus on these issues in the general election campaign.

This is why the AFL-CIO endorsed Obama last month: because he’s a candidate who understands, cares about and will fight for working families.
Precontact is offline  
Old 08-25-2008, 04:22 PM
  #4  
With The Resistance
 
jungle's Avatar
 
Joined APC: Jan 2006
Position: Burning the Agitprop of the Apparat
Posts: 6,191
Default

"This is why the AFL-CIO endorsed Obama last month: because he’s a candidate who understands, cares about and will fight for working families."

That is interesting, he was also endorsed by the American Communist Party.

Ever take a look at the voting record instead of what they say?

http://www.votesmart.org/voting_cate...hp?can_id=9490
jungle is offline  
Old 08-25-2008, 04:31 PM
  #5  
Gets Weekends Off
Thread Starter
 
Joined APC: May 2006
Posts: 977
Default

Dude, I'm not endorsing the guy, just stating what was in the article. The point is that Fred's business model is in trouble, and since he is friends with McCain, it will be interesting to see how this story develops this election year.
Precontact is offline  
Old 08-25-2008, 05:33 PM
  #6  
Gets Weekends Off
 
Joined APC: Feb 2006
Posts: 1,068
Default

Originally Posted by Precontact View Post
Dude, I'm not endorsing the guy, just stating what was in the article.
While likely not your intention, you have successfully recreated what it's like to get into a conversation with some of our guys/gals
Daniel Larusso is offline  
Old 08-25-2008, 06:11 PM
  #7  
"blue collar thug"!
 
iarapilot's Avatar
 
Joined APC: Nov 2006
Position: A proponent of...
Posts: 1,614
Default

Originally Posted by Daniel Larusso View Post
While likely not your intention, you have successfully recreated what it's like to get into a conversation with some of our guys/gals
LMFAO! So true, of the public in general!
iarapilot is offline  
Old 08-25-2008, 06:13 PM
  #8  
With The Resistance
 
jungle's Avatar
 
Joined APC: Jan 2006
Position: Burning the Agitprop of the Apparat
Posts: 6,191
Default

If you take the article at face value it implies that either candidate will be able to influence twenty courts in twenty states for a desired outcome.

I think that is just a tad farfetched.
jungle is offline  
Old 08-25-2008, 08:42 PM
  #9  
Gets Weekends Off
 
MEMA300's Avatar
 
Joined APC: May 2006
Position: Excessed WB Capt.
Posts: 1,058
Default

Originally Posted by jungle View Post
If you take the article at face value it implies that either candidate will be able to influence twenty courts in twenty states for a desired outcome.

I think that is just a tad farfetched.
You should stick to taking pictures.
MEMA300 is offline  
Old 08-25-2008, 08:59 PM
  #10  
Gets Weekends Off
 
Joined APC: Mar 2007
Position: No more APC 4 me. Quit because of moderation.
Posts: 134
Default

McCain is an idiot, and any pilot who votes for McCain needs their head examined!
Brown is offline  

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are On


Thread Tools
Search this Thread
Your Privacy Choices