DHL US Express restructures, partners with UPS for airlift

Citing goals of reducing costs, providing better service and creating a platform for sustainability and growth, Deutsche Post World Net plans to extensively restructure its DHL US Express business.

“We believe that as a result of the restructuring that customers can expect even more reliability and resiliency in service performance through a more simplified and better integrated network,” said Jonathan Baker, director of corporate communications for DHL Americas. He stressed that DHL was committed to staying in the US market.

The plan could cost up to $2 billion. DHL said it will decrease its infrastructure network in the US by 30%. The company’s ground linehaul network will be reduced by 18%, while pickup and delivery routes will be decreased by 17%. Smaller sorting facilities will be closed and consolidated, resulting in further reductions of about 34%.

“There’s no change to our international or domestic product offering,” Baker said. “While we will be consolidating certain stations in low volume, sparsely populated areas of the country, less than 4% of our current shipment volume will have any impact from the restructuring,” he said.

The company said it also plans to cut staff by approximately 4% in its US operations. DHL US’ workforce consists of 40,000 employees and associates, according to the company.

As part of the plan, the transport and logistics company said it has agreed to contract with UPS to provide airlift for DHL Express US domestic and international shipments within North America. The proposed 10-year agreement will create a single airline partner for DHL Express in the US, the company said. DHL previously used ABX and ASTAR to provide airlift, Baker said.

According to UPS, the agreement — when finalized — will provide the company with $1 billion in additional annual revenue.

DHL will also expand its existing relationship with the US Postal Service to provide “last-mile” delivery in certain locations. The USPS has provided this service for DHL since 2003 in more than 20,000 ZIP codes through its Parcel Select service, according to the USPS.

This year, Deutsche Post said it expects a loss in underlying earnings before interest and tax (EBIT) of $1.3 billion for its DHL US Express business. As a result of the proposed changes, the company said it expects to save approximately $800 million in 2010 and $1 billion in 2011.

To implement the restructuring plan, DHL recently appointed Ken Allen as CEO of DHL Express US. Allen previously served as CEO of DHL Express Eastern Europe, Middle East and Africa.

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