Deutsche Post World Net announced a plan to restructure its DHL US Express business by working with UPS for airlift capacity and reducing costs in its ground infrastructure. Under the plan, DHL and UPS have agreed to develop a contract whereby UPS will provide air uplift for DHL Express US domestic and international shipments within North America. In addition, DHL will align its US Express infrastructure to existing shipment volumes by redesigning its ground linehaul network to better match capacity with customer requirements. The impact on service levels will be minimal with less than 4% of shipments affected. DHL remains focused on delivering international and domestic Express products, offering an attractive alternative for US customers and keeping a strong commitment to the US market.
The restructuring plan will lead to sustainable improvements in financial performance and provide a sound starting point for a more efficient and customer-oriented business in the future. In 2008, the company expects an underlying EBIT loss of $1.3 billion in US Express. Through the expected cost savings of around $800 million in 2010 and around $1 billion in 2011, underlying EBIT will improve accordingly. First positive effects of the plan will start showing already in 2009. The company expects to spend up to $2 billion to finance the restructuring plan. Due to the uncertain economic situation in the US, Deutsche Post World Net is reducing its guidance for underlying EBIT in the EXPRESS Corporate Division in 2008 to around 400 million euros from around 500 million euros. Subsequently, the Group’s full-year guidance before non-recurring effects and restructuring costs will be reduced slightly by 100 million euros to around 4.1 billion euros.
‘We have promised to relentlessly focus on improving financial performance and delivering on our Roadmap to Value program. I am confident we have found a sustainable way forward for US Express in the best interest of customers, employees and investors,’ said Deutsche Post World Net Chief Executive Officer Frank Appel at a press conference in Bonn. ‘Taking a pragmatic approach, we will go on to be a smarter player in the challenging US Express market. We will continue to offer premium service to customers who rely on DHL as the leading network operator across the globe. And we will continue to leverage our express, logistics and mail offerings, which in combination make DHL unrivalled as the world’s leading logistics company.’
DHL is taking action both in its infrastructure network and in aviation with a restructuring plan that focuses on three main elements:
1. Reducing infrastructure network capacity by approximately 30% through the following detailed measures:
’ Consolidating and closing smaller sorting facilities into modernized, larger stations, resulting in reductions of approximately 34%
’ Rationalizing pickup and delivery routes by 17%, including new courier routing plans to enable better route planning and avoiding peaks in the operation, as well as making changes to staffing plans
’ Ground linehaul network rationalized by 18% through improved capacity utilization and footprint reductions in some remote areas.
2. A proposed contract between DHL and UPS whereby UPS will provide air uplift for DHL Express US domestic and international shipments within North America
3. Reduction in overhead and other administrative costs
As one central part of its restructuring activities, DHL and UPS will pursue a contract to provide air uplift, creating a single airline partner for DHL Express in the US DHL will continue to operate its courier and ground network as well as pickup and delivery services to its customers across the country. The proposed agreement, in character and scope representing an efficient model in the express industry, will extend for 10 years. The commencement of UPS service into the DHL network is expected to begin later this year. The proposed contract provides both DHL and UPS substantial economic benefits in the US Express market, which remai