Deutsche Post tries to quell DHL sale talk

Deutsche Post tries to quell DHL sale talk Deutsche Post tries to quell DHL sale talk
   Deutsche Post has no intention of abandoning the U.S. express delivery market, DHL USA spokesman Jonathan Baker said.
   FT Deutschland, the Financial Times sister paper, reported Thursday that the German postal and logistics group is discussing the sale of the struggling DHL express unit with FedEx, one of its main competitors.
   Earlier last week Deutsche Post World Net said it would reduce the book value of DHL USA by about 600 million euros ($877 million).
   The company last November abandoned a 2009 breakeven target for DHL Express due to the softening U.S. economy and tough competition from the likes of UPS and FedEx.
   Deutsche Post entered the U.S. domestic market in 2002 with the purchase of DHL as a platform for ground operations, and acquired Airborne Express in 2003 as an overnight air express unit. Since 2005 DHL has invested more than $1.2 billion to expand its delivery network with new regional sort centers and improve service with upgraded information technology systems. DHL experienced major integration challenges trying to graft its intercontinental express business with the Airborne air network and expanding the DHL intercity ground network. The company experienced severe service failures in late 2004 and 2005 as it tried to overcome its limited network, high-cost air subcontractors and aging planes while launching an aggressive marketing campaign for new business.
   The company has bled hundreds of millions of dollars each of the past four years, especially early on as it tried to compete as a low-cost provider of express delivery service.
   “There is no question of our exiting the U.S. business. We’re committed to serving our U.S. customers,” Baker said. He noted that Deutsche Post does not plan to respond to ongoing rumor or speculation, but wanted to emphasize that it has “a strategy to succeed in the U.S. market.”
   Supporting that position is the fact that DHL earlier this month said it had reached a partnership agreement that will allow small shippers to send packages from 6,500 Walgreen drug stores.
   The statement, however, doesn’t necessarily preclude the possibility that Deutsche Post might divest a portion of its DHL domestic business, such as the ground network, while still retaining a feeder system for its strong international express business.
   In fact, Morgan Stanley put out a research note earlier this month saying Deutsche Post is considering restructuring the U.S. business.
   The investment bank said the most logical outcome is for DHL Express is to cut its network size and use domestic subcontractors to ensure interconnectivity with its international service.
   “The U.S. express business is a key management priority and we are looking at a variety of options to improve performance. In doing so, we are committed to maintaining a significant presence in the U.S. market, which remains of strategic importance to the group,” said Chief Financial Officer John Allan in a statement alerting of the write-down. ' Eric Kulisch