DHL reins in its ambitions in US market
DHL, the package delivery arm of Deutsche Post, has said it does not want to chase US market share from UPS and FedEx, signalling a reining in of the company’s ambitions in North America.
John Mullen, joint chief executive of DHL Express, characterised the company’s plans in the US as “realistic and modest”, insisting it was not “setting out to create another UPS or FedEx”.
His comments, at a Bear Stearns investor conference in New York, eased concern that DHL might spark a price war in the US package delivery market after two years of heavy investment. Mr Mullen said the company’s most urgent objective in the US was to improve service quality, which he described as having been “horrendous” last year. Once service improved, DHL would seek to increase prices closer to those of UPS and FedEx rather than cut them, he said.
“We’re not driven by market share gains,” said Mr Mullen. “We want to get more value out of the volume we have rather than chase more volume.”
DHL has won nearly 7 per cent of the US market since entering the country two years ago through the Dollars 1bn acquisition of Airborne, a Seattle-based delivery company. It has pledged a further Dollars 1.2bn of investment in the country. But losses in the US were Euros 495m (Dollars 625m) last year, on sales of Euros 4.3bn.
Mr Mullen said the company would lose up to Euros 300m this year but aimed to break even in the fourth quarter of 2006. DHL had no plans for further investment in the US, he said.
Mr Mullen’s measured language contrasted with the bullish attitude adopted by DHL in its high-profile advertising campaign in the US since entering the market. One DHL slogan predicted the end of the “FedEx empire”, while another said yellow, the company’s corporate colour, was the “new brown”, referring to UPS’s livery.
DHL is the biggest package delivery company in Europe and Asia but was almost unknown in the US before acquiring Airborne. Mr Mullen said the integration of Airborne had “put a lot of pressure on the company in the past 12 months”.
“We made quite a few mistakes and had some surprises. Service fell to levels during the integration that were totally unacceptable.”
On-time delivery rates fell as low as 80 per cent last year but have since recovered to 98 per cent, according to Mr Mullen.
