German parent plans 600 million euro writedown for DHL Express

German parent plans 600 million euro writedown for DHL Express German mail, express and logistics conglomerate Deutsche Post World Net said Wednesday it will reduce the book value of its struggling DHL Express unit in the United States by about 600 million euros ($877 million).
   The Bonn-based company said the non-cash writedown of DHL Express assets would be recognized in the 2007 accounts. Deutsche Post 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.
   However the company said it remains committed to the express division in the United States, and expects the overall division to reach earnings before interest and tax (EBIT) of 900 million euros to 1.1 billion euros in 2009.
   “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.
   Deutsche Post added that its underlying EBIT in 2007 was in line with its forecast of about 3.7 billion euros and has targeted EBIT of about 4.2 billion euros for 2008.
   Meanwhile, the company announced plans to contract out parts of its global information technology infrastructure to Hewlett-Packard in a move designed to save the group at least 1 billion euros over seven years. Under the proposed agreement, HP will take on about 2,500 Deutsche Post employees who currently provide the German firm’s data center operations in Prague, the Czech Republic; Scottsdale, Ariz.; and Cyberjaya, Malaysia, as well as in a number of European countries. The two companies expect to reach a definitive agreement by mid 2008.