Deutsche Post reignites German lay-offs row
PLANS by Deutsche Post, Germany’s postal company, to lay off thousands of staff will this week reignite the row over sackings.
German ministers have demanded that consumers boycott the products and services of profitable firms that axe their workforces. The sackings will embarrass and anger Chancellor Gerhard Schroder’s ruling Social Democrats (SPD), because the company is state-controlled.
According to Deutsche Post chairman, Klaus Zumwinkel, declining income in the letter-carrying sector could force the group to cut as many as 6,000 jobs. Profits as a whole are expected to rise.
Leading members of the SPD, including vice-chairwoman Ute Vogt, recently called for a boycott of profitable companies that lay off workers as unemployment rose to 5m, almost 11% of the working population. If they were to do the same with Deutsche Post, the SPD would be telling Germans to stop patronising a company in which it has a 56% stake.
Deutsche Post is expected to disappoint investors when it releases first-quarter profit data on Monday; but analysts are sticking to predictions that growth this year will warrant a rise in the stock price. A government call to boycott Deutsche’s services could have an adverse impact on its shares.
The former state monopoly is likely to announce earnings before interest and tax of around E850m ($1bn, GBP578m) for the first three months of the year, according to analysts’ estimates. Deutsche Post earned about E940m in the same period of 2004 and market consensus was that it would announce profits of between E900m and E950m for the last quarter. But those familiar with the company say fewer working days in the period and difficulties integrating express postal operations have cut the bottom line.
The poor performance in the last quarter is likely to have little impact on this year’s earnings, with a spate of ratings upgrades predicting improved profits. Goldman Sachs has turned bullish on the shares. In recent guidance, it noted that fair value for Deutsche Post is E21.40 a share, well above the E18.43 close on Friday.
“The current share price seems harsh to us,” it said, adding that net income will rise about E800m to E2.3bn this year. Increasing profits at a time of job cuts is anathema to leading members of the SPD. One of the party’s main targets was Deutsche Bank, which earlier this year announced a E2.4bn profit and 6,400 job cuts.
The anti-business rhetoric increased last weekend after the leak of a party document naming US private equity investors as examples of “locusts” who destroyed jobs in Germany. Anti-capitalist forces in the SPD could decide to attack Zumwinkel, but with Berlin needing all the income it can get, politicians cannot afford to cause a shake up at a firm that is filling government coffers.
