Thread: DHL to cut 9,500 jobs in U.S.

DHL to cut 9,500 jobs in U.S.

Mon Nov 10, 2008
11:19am EST
By Nick Carey and Maria Sheahan

CHICAGO/BONN (Reuters) - Deutsche Post AG will slash 9,500 jobs and halt U.S. domestic services at its DHL Express unit after failing for five years to gain share in a market dominated by United Parcel Service Inc and FedEx Corp.

The announcement on Monday from Deutsche Post sent its shares up nearly 7 percent, but also lifted the stock of UPS and FedEx -- which are both seen benefiting from DHL's departure from the U.S. market.

The U.S. job cuts, anticipated by many analysts, comes on top of 5,400 layoffs already this year, leaving between 3,000 and 4,000 U.S. employees.

"We think the unfolding U.S. recession dramatically extended DHL USA's timeframe for potential break-even and increased the financial pain that would have to be absorbed until then," UBS analyst Rick Paterson wrote in a note for clients. "This was too much for Deutsche Post shareholders and, ultimately, the company itself."

As of January 30, DHL will continue providing international service in and out of the United States. This will take it back to where it stood before its acquisition of Airborne Inc in 2003, a purchase that cost it billions of euros in losses.

"It is no secret that we've had had an extremely difficult time over the last two years in the United States with losses over $1 billion every year," John Mullen, Chief Executive of DHL Express said on CNBC television, "and now of course we're entering unprecedented economic times both in the United States and globally."

"We had to make a prudent decision," Mullen added.

An additional $3.9 billion in restructuring costs -- $1.9 billion more than previously planned -- would likely lead to a full-year 2008 group net loss, Deutsche Post said.

"We believe DHL's withdrawal, which removes a player that has traditionally been a price discounter, from the domestic air and ground markets will both boost volumes and improve the pricing discussion for UPS and FedEx," Wachovia analyst Justin Yagerman wrote in a note for clients.

GRIM TIMES

Atlanta-based UPS, the world's largest package delivery company, and its Memphis-based rival FedEx are seen as bellwethers of U.S. economic activity.

Sluggish consumer spending and shrinking investments by businesses have hurt them and other shippers around the world. Last month UPS recorded a drop in third-quarter profit, as did European competitor TNT. Both cited weak demand.

Deutsche Post's announcement on Monday came as it reported that third-quarter adjusted earnings before interest and tax (EBIT) fell 8.5 percent to 429 million euros from 787 million a year earlier, slightly missing an average estimate of 433 million euros in a Reuters poll of analysts.

Last year Europe's biggest mail and express delivery company cut its profit outlook for 2008 and 2009, citing slowing global economic growth, which hit its U.S. unit hard.

Deutsche Post confirmed it saw full-year EBIT at about 2.4 billion euros, excluding one-time effects and its Deutsche Postbank unit. It did not give an outlook for 2009.

A spokeswoman for DHL's main air cargo carrier, ABX Air, said on Monday the company was assessing the impact of DHL's move, and would make an announcement later.

ABX Air, part of Air Transport Services Group Inc, said in August it would have to cut 6,000 or more jobs, about 75 percent of its total staff, if DHL went ahead with plans to use the planes of rival UPS to move its parcels.

Deutsche Post said talks with UPS on cooperation continue and should be concluded by the end of the year.

FedEx spokesman Maury Lane said the company welcomed "the opportunity to provide domestic U.S. Ground and Express services to all DHL customers as DHL exits these markets."

In a note to clients Edward Wolfe of Wolfe Research wrote that in "recent weeks we have seen FedEx and UPS' pricing firming with respects to DHL customers as it has become more clear DHL would be forced to close."

"Still we don't expect a material improvement in pricing until the economy improves," he added. "We would expect the DHL announcement will lead to pricing getting less worse in the near term."

In late morning trade on the New York Stock Exchange, UPS shares were up 3.9 percent to $53.92, while FedEx was up 2.7 percent to $66.35. Deutsche Post rose 6.9 percent to 10 euros.

(Additional reporting by Bill Rigby, Scott Malone, Nick Zieminski; Editing by Tim Dobbyn)

http://www.reuters.com/article/topNews/ ... 10?sp=true

I heard more job cuts than this story said. Either way......more and more people are loosing jobs.......in every sector. I don't think we can run an economy on McDonalds and Wal-Mart.