DHL To Restructure US Operations

From Modern Materials Handeling:

DHL Express U.S. announces restructuring plan

DHL plans to close some U.S. stations and contract with UPS for airport-to-airport transportation.

by Jeff Berman, Group News Editor -- Modern Materials Handling, 5/28/2008

After months of speculation regarding the future of DHL Express’s U.S. operations, parent company Deutsche Post World Net said today that it plans to significantly reduce DHL Express’s domestic footprint, although there are no plans to exit the U.S. market altogether.

In a press conference held earlier today at DPWN headquarters in Bonn, Germany, DPWN rolled out a series of initiatives for DHL Express U.S. operations. These initiatives include a plan to work with UPS on a 10-year, $10 billion contract for airlift capacity and a plan to reduce costs in ground infrastructure operations.

DPWN said DHL and UPS have agreed to develop a plan in which UPS will provide airlift for DHL Express U.S. domestic and international shipments from airport to airport within North America. (This contract is not yet finalized.) DHL currently uses ABX Air and Astar Air Cargo for these services. DPWN said this contract will provide DHL with a single airline partner in the U.S.
DPWN said its U.S. restructuring plan for DHL Express will materially reduce aviation costs through outsourcing to UPS;

• rationalize infrastructure by 34% by closing and consolidating U.S. stations in low density and remote areas;
• reduce pickup and linehaul delivery routes by 17%;
• reduce ground linehaul sectors by 18%.
  

Another component of the restructuring will include an expansion of DHL’s partnership with the United States Postal Service (USPS), which DPWN said will enable DHL to continue delivering to more rural parts of the country. This is expected to have a minimal impact on delivery services capabilities, according to DPWN, with less than 4% of pickup and delivery volumes expected to be affected, despite a significant cost reduction.

“There are not going to be any changes with our product offerings,” said DPWN CEO Frank Appel. “We are going to continue to work domestic air, domestic ground and global shipments…we will also use partners like the USPS for last-mile deliveries. This is a ripe path for our businesses, which will significantly reduce overall costs.”

Also included in the restructuring of U.S. operations are 1,500 to 1,800 job eliminations, according to DHL Express CEO John Mullen. When asked about how many domestic DHL stations would be shuttered, he declined to comment, instead referring to the announced 34% reduction through closing and consolidating stations.

These job eliminations follow a February announcement in which DHL Express U.S. reduced its workforce by approximately 600 positions.

Today’s news comes after wide speculation that DPWN would be re-evaluating its strategy for DHL Express U.S. In recent years, the company has struggled for market share, competing against UPS, FedEx and the USPS.

DHL Has a 600,000 SF Building in March AFB in Riverside, as well as a smaller center in Oxnard.

These buildings are not up for sublease yet, but I am waiting for it.

DHL has a very strong international market presence but here in the United States, DHL outsources most everything in a cobbled together network that was just not able to compete against UPS and FedEx.

DHL is the express delivery unit of Germany's Deutsche Post AG, and has been subsidized for a number of years for German delivery service. What is kinda funny is that DHL employees in the United States are not unionized, but UPS employees are.

DHL cannot totally escape the US market, since the United States is the main originator of international freight. It needs to be able to handle both sides of the equation, foreign and domestic, otherwise customers will go elsewhere.