Deutsche Post to cut 9,500 jobs in the U.S.

updated 10:59 a.m. ET Nov. 10, 2008

FRANKFURT, Germany - Deutsche Post AG will close all of its DHL Express service centers, cut 9,500 jobs in the United States and eliminate U.S.-only domestic shipping by land and air, the company said Monday, citing heavy losses and fierce competition.

The Bonn-based company said that new round of cuts are 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.

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. will continue. The Express unit currently employs some 18,000 workers.

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.

Deutsche Post said the U.S. remained a key market and that its other operations, including Freight and Global Mail and other logistics, won't be affected by the closings.

"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.

Deutsche Post's announcement Monday appeared to go beyond the elimination of ground products within the U.S. Deutsche Post said it will discontinue U.S. domestic-only air and ground products on Jan. 30 to focus entirely on its international offering.

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 an additional $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.

Next year, the loss should not be more than $900 million (692 million euros).

Deutsche Post's U.S. logistics unit employs more than 25,000 workers in the U.S.

Shares of Deutsche Post were trading up 9 percent at 10.20 euros ($13.16) in Frankfurt trading.

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