Deutsche Post seeks FedEx partnership to stem DHL Express US losses – report
Deutsche Post is reportedly in talks with FedEx over a partnership with DHL Express designed to reduce its heavy losses in the USA. The report, which follows news of the planned EUR 600m writedown of US assets, has not been confirmed.
The Financial Times Deutschland reported today that DPWN executives want FedEx to take over DHL Express’ domestic US operations. In exchange, DHL Express would provide services in Europe for FedEx. Talks are taking place with FedEx chairman Fred Smith, the newspaper said, citing sources close to the company. DPWN CFO John Allan told the newspaper: “We have several options.”
News agencies cited DPWN spokespersons as saying that no decisions have yet been made about the future of the US express business. Talks with FedEx were not confirmed.
The Frankfurter Allgemeine Zeitung’s online website cited Allan on Friday as saying that it was “ very, very unlikely” that the domestic US business would be given up due to the strategic importance of the market. The priority was to reduce the US losses “as quickly as possible and very substantially”. But this did not necessarily mean having to make a profit in the USA since a substantial amount of international business was generated there, he noted.
DPWN announced late on Wednesday that it will write down the value of DHL Express Americas by EUR 600 million in its 2007 results due to the loss-making US business. The group said that it is continuing to identify the “optimal solution” to improve the performance of the US express business.
But Allan stressed in the statement: “The U.S. Express business is a key management priority and we are looking at a variety of options to improve performance. In doing so, we are committed to maintaining a significant presence in the U.S. market, which remains of strategic importance to the Group.”
Influential analysts recently called on DPWN to downscale its US express operations significantly to reduce long-running heavy losses. Last November, due to the increasing impact of the slowing US economy, DPWN scrapped the target of achieving a breakeven in the USA by 2009.
