The financial impact of DHL U.S. Express' repositioning
Deutsche Post World Net today announced that it will reposition its unprofitable DHL U.S. Express business to focus entirely on its international service. DHL U.S. Express will discontinue domestic-only services at the end of January, 2009. The following is an overview of the financial implications of the move.
- Costs: The Group now plans to reduce annual operating costs at its DHL U.S. Express business by more than 80 percent from the current $5.4 billion (4.2 billion euros) to less than $1 billion (770 million euros). The aim is to reduce risk levels and increase predictability of the future impact of the business.
- Restructuring costs: The Group expects to spend an additional $1.9 billion (1.5 billion euros) on the restructuring, bringing the total Group costs to $3.9 billion (3 billion euros) over two years, most of which will be booked in 2008.
- Expected Losses: As a result of the restructuring measures, losses at the DHL U.S. Express business are now likely to amount to $1.5 billion in 2008 before one-off costs. For 2009, the loss is expected not to exceed $900 million and to stabilize at an annualized level of below $400 million already in the fourth quarter of 2009. Thus, losses will be reduced faster than originally planned.
- Jobs: A total of 9,500 jobs at DHL Express in the U.S. will be cut as a result of the measures on top of the approximately 5,400 positions already reduced since the beginning of the year. 3,000 to 4,000 jobs will remain.
- Network: DHL U.S. Express will shut all ground hubs and reduce the number of stations from 412 to 103.
- Effect: The value the U.S. Express business generates for the global Express network will clearly exceed the annual losses. The Group still aims for the global DHL Express business to generate its cost of capital in 2010.
- International express service: DHL's U.S. international express service will be maintained at today's levels. DHL will offer the latest pickup and the earliest delivery times for international shipments into and out of many major U.S. metropolitan areas. International shipments into the U.S. will continue to be delivered and outbound international shipments will continue to be picked up with virtually no change to current service levels.
- Other businesses: The U.S. remains a key market for Deutsche Post World Net. The service of DHL's other business in the U.S. - Supply Chain/CIS, Global Forwarding/Freight and Global Mail - will be unaffected by the restructuring measures at Express. The Group will continue to invest in these successful U.S. units, which together employ more than 25,000 people in the country.