DHL cuts US losses
The usually dark clouds that hovered over express and logistics giant DHL's US business are now beginning to show the proverbial silver lining. John Mullen, parent Deutsche Post's top man in the US, told an investors' conference in New York that DHL can reach profitability in a matter of two to three years – as early as 2008.
Mullen's prediction is a departure from the past forecast by the group that its loss-making express business in the US would become profitable only after 2009.
Mullen said that the group's US express business expects to reduce losses in the second half of 2006 by about USUSD150 million to USD200 million over the previous year. In 2005, DHL recorded a loss of USD508 million.
The German group has a "long and tough way" to tread in the fiercely competitive US express business, Mullen acknowledged. On a long-term basis, DHL would like to achieve a margin of three to five percent in the United States – much less than its competitors UPS and FedEx.
DHL suffered from organisation problems as it tried to put together its two US aviation hubs at Wilmington airport in Ohio in 2005 which resulted in the group losing several clients.
On the Asian front it is a much brighter picture for DHL. It has boosted its presence in the region with the recent investments in Thailand and Vietnam.
DHL has set up a USUSD22 million express Bangkok hub at the new Suvarnabhumi Inter-national Airport. The hub will serve as a gateway into the Indochina region, including Thailand. Indochina has achieved good economic growth in the past decade.
The Bangkok hub, covering 12,000 sq m – about the size of 40 tennis courts – with almost 10,000 sq m of warehouse space, is five times larger than the former facility at Don Muang Airport. The hub has the capacity to handle over 23,000 pieces hourly and more than six million shipments per year. The hub will also house a quality control centre which will operate around the clock seven days a week.
Scott Price, chief executive officer, DHL Express, Asia Pacific, said: "The new Bangkok hub reinforces DHL's commitment to Thailand and the region. It is strategically positioned for us to meet our business growth in Thailand, as well as the neighbouring countries. The new facility also provides our customers with increased speed, reliability and greater capacity, to boost their time-to-market in an increasingly competitive international marketplace."
The Bangkok hub, together with hubs in Hong Kong, Singapore, Seoul, Sydney and Tokyo as well as gateways in Asia-Pacific countries, forms a powerful hub-and-spoke network that channels shipments across Asia Pacific and beyond seamlessly and around the clock.
In Vietnam, DHL is investing USD14 million for infrastructure upgrades and service expansion of it express business, as well as a commitment to strengthen its logistics presence by continuing initiatives with their appointed agent, Macs Shipping, on staff training, technological upgrade, and developing Customs clearances and transportation services. In addition, the logistics entity will build Vietnam as a mid-point to transit shipments from other regions into Laos, as well as develop cross border transportation between Vietnam and countries such as Cambodia and South China.
The expansion in Vietnam brings DHL's total Asia Pacific investment to more than USD1.7 billion, including the logistics infrastructural investment in China, the expansion of the Incheon facility in South Korea and the inauguration of the new Bangkok hub.
"Our commitment in the Asia Pacific region is driven by customer needs arising from a steady flow of trade volumes within the intra-Asia region. We believe that our network infrastructure will serve the sophisticated needs of our customers and will enable us to facilitate trade for our rapidly.
