FRANKFURT, Germany (AP) – German mail and logistics company Deutsche Post AG will cut 9,500 jobs at its DHL unit in the U.S. and eliminate U.S.-only domestic express shipping by land and air, the company said Monday, citing heavy losses and fierce competition.
The Bonn-based company said the new round of cuts is on top of another 5,400 job cuts it already announced and blamed heavy losses at the unit, which competes with rivals UPS Inc. and FedEx Corp.
Deutsche Post investors cheered the decision, sending the company’s shares up 7 percent to 10 euros ($12.90) in Frankfurt trading.
The cuts are part of a wider plan to curtail operations in the U.S., including domestic ground and delivery services though its international shipping to and from the U.S. would continue. The Express unit currently employs some 18,000 workers.
However, Deutsche Post said the U.S. remained a key market and that its other operations there, including freight and global mail and other logistics, won’t be affected by the closings.
Deutsche Post’s U.S. logistics unit employs more than 25,000 workers in the U.S.
Part of the plan calls for the halt to domestic shipping by Jan. 30, the company said after it closes all of its ground hubs and reduces the number of service centers from 412 to 103 across the U.S.
At a press conference, company officials, including Chief Financial Officer John Allan, said the job cuts and location closures would be “clear across the country,” without being more specific.
“The retained U.S. international Express network with a total of 3,000 to 4,000 employees will be tailored to the needs of the group’s international Express service customers,” the company said in a statement. “All international shipments into the U.S. will still be delivered, while 99 percent of the outbound shipments will be picked up.”
It wasn’t immediately clear how Deutsche Post’s decision might affect a proposed collaboration announced in May between DHL and Atlanta-based UPS in which UPS would carry some air packages for DHL. The deal, if completed as initially proposed, could last up to 10 years and infuse up to $1 billion in annual revenue for UPS.
UPS has said the contract, which it has been working to finalize, would mostly involve the transport of DHL packages between airports in North America – not the pickup or delivery of DHL packages to customers.
A person familiar with UPS’ talks with DHL said Friday that if DHL made significant cuts to its ground operations in the U.S., it wouldn’t necessarily affect UPS and DHL reaching a deal since their talks have solely involved air delivery of packages, not ground delivery. The person spoke on condition of anonymity because of the sensitive nature of the talks.
A spokesman for UPS said Monday the company would have to review Deutsche Post’s statement before commenting.
Deutsche Post’s decision is expected to reduce operating costs at the U.S. Express unit from $5.4 billion (4.2 billion euros) to less than $1 billion (770 million euros).
“The international Express offering in the U.S. will be maintained on today’s levels and the region will remain an integral part of DHL’s global Express network,” the company added.
Deutsche Post said it expects to spend another $1.9 billion (1.5 billion euros) on the restructuring, bringing the cost to $3.9 billion (3 billion euros) over two years. Most of that will be booked this year.
Because of the restructuring, Deutsche Post said the total losses at its U.S. Express business would reach $1.5 billion (1.2 billion euros) for the year.
The decision was announced as Deutsche Post said its third-quarter net profit more than doubled to 805 million euros ($1 billion) compared with 350 million euros a year earlier. Sales rose 4.1 percent to nearly 14 billion euros ($18 billion).
AP Business Writer Harry R. Weber contributed to this report from Atlanta.
On the Net:
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.