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FedEx Corp. plans to spend more than $100 million to improve delivery van safety and reduce costs from accidents, potentially dragging on short-term earnings as the courier faces pressure from rising wages and other expenses.
The company’s ground unit is offering $1,500 per vehicle to reimburse its contractors for installing cameras and sensors that warn drivers of obstacles or other vehicles, according to documents viewed by Bloomberg News. The unit’s contractors operate about 72,000 vehicles, FedEx said.
“As e-commerce continues to drive substantial growth in our industry, the number of resources needed to meet this demand is increasing, which requires even greater focus on motor vehicle safety,” the Memphis, Tenn.-based company said by email.
FedEx already is facing rising costs for wages and materials that are pinching profit as package growth decelerates from the pandemic-fueled highs of 2020 and earlier this year. Analysts expect the ground unit’s average daily package volume in the quarter through Aug. 31 to show an increase of 6.2% from a year earlier. That’s down from a 25% surge in the quarter through February. FedEx reports earnings Sept. 21.
The safety equipment includes sonar and camera systems that help avoid collisions from blind spots and backing up. Approved suppliers include Brigade Electronics Group Plc and Continental AG, according to the documents. FedEx in June also will require that vehicles added to fleets be equipped with speed limiters, lane-departure warnings and systems for avoiding forward collisions.
The moves are intended “to reduce recurring accident maneuvers, especially maneuvers that can lead to sideswipe, backing and turning accidents,” the documents said. “These technologies help mitigate risks associated with the combined forces of sharp increases in deliveries to residential neighborhoods and the influx of drivers.”
READ MORE: FedEx to Raise Rates the Most in Decade
FedEx had already required delivery contractors by Aug. 28 to install devices that can record video in case of accidents or abrupt maneuvers. Such systems will help with “reducing false claims and lowering costs,” the documents said. Although contractors are independent companies, the ground unit provides coverage for large accident claims.
The ground unit also is considering whether to have each contractor designate an employee as a trainer. That employee would take a $2,600 course that may be reimbursed by FedEx and then train new drivers. FedEx would then drop a requirement for drivers to have at least one year of experience in the past three years, or five years of experience in the past 10.
FedEx Corp. ranks No. 2 on the Transport Topics top 100 list of for-hire carriers in North America.
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