DHL Express Global CEO testifies before House Committee on the judiciary
DHL Express Global CEO John Mullen testified before the House Committee on the Judiciary regarding the company’s potential contract with UPS for domestic air lift and related services. The proposed agreement with UPS is part of DHL Express’ U.S. restructuring aimed at enabling the company to remain a viable competitor in the U.S. market.
During the Hearing, Mullen stated that the pending deal with UPS does not violate antitrust laws and does not decrease competition in any way. He added that the contract is a pro-competitive vendor-services agreement for air and related services only. “DHL would retain complete control over every customer-facing aspect of the business and remain an independent and viable competitor in the U.S. air express delivery sector retaining full control over our ground operations, as we do today,” Mullen stated.
The potential execution of this pending agreement will affect DHL employees, as well as those of DHL’s current air service vendors, ABX Air and ASTAR Air Cargo at the Wilmington Air Park. DHL is sensitive to this situation and therefore has agreed to provide a generous USD 260 million severance, retention and other benefits, USD 225 million of this voluntarily, to impacted DHL, ABX and ASTAR employees. DHL Express Global CEO John Mullen testified before the House Committee on the Judiciary regarding the company's potential contract with UPS for domestic air lift and related services. The proposed agreement with UPS is part of DHL Express' U.S. restructuring aimed at enabling the company to remain a viable competitor in the U.S. market.
During the Hearing, Mullen stated that the pending deal with UPS does not violate antitrust laws and does not decrease competition in any way. He added that the contract is a pro-competitive vendor-services agreement for air and related services only. "DHL would retain complete control over every customer-facing aspect of the business and remain an independent and viable competitor in the U.S. air express delivery sector retaining full control over our ground operations, as we do today," Mullen stated.
The potential execution of this pending agreement will affect DHL employees, as well as those of DHL's current air service vendors, ABX Air and ASTAR Air Cargo at the Wilmington Air Park. DHL is sensitive to this situation and therefore has agreed to provide a generous USD 260 million severance, retention and other benefits, $225 million of this voluntarily, to impacted DHL, ABX and ASTAR employees.
Summary of the September 9th, 2008 written testimony of John Mullen:
On May 28th 2008, DHL announced a major restructuring of its express business in the United States. This restructuring, if completed, would address significant on-going losses in the U.S market, and, hopefully, allow DHL to remain a viable competitor in the U.S. air express business and to continue providing future employment opportunities in the U.S.
DHL has not taken this action lightly. Since 2003, DHL has invested over $5 billion building our presence in the U.S. market. DHL's objective was to offer to the business customer an alternative shipping option to the extensive domestic services offered by UPS and FedEx, which are the leaders in the U.S. domestic air express. However, despite DHL's heavy investment and determined efforts to build credibility in the U.S. market, its air express volumes have declined over this period, due in part to the generally deteriorating market conditions in the U.S. overnight air sector. Meanwhile, DHL's operating costs, especially jet fuel expenses, have increased dramatically. Even though DHL has taken a long-term view of its U.S. business, it cannot ignore the fact that these operating losses – about $5 million per day – are simply unsustainable for the company, its shareholders and for its employees.
On May 28, 2008, therefore, the company announced a restructuring plan for DHL Express in the U.S., consisting of two main elements: (1) the reorganization and consolidation of its domestic (ground) network, and (2) a possible shift of its domestic airlift and attendant sorting activity from its two current providers (ABX and ASTAR) to one single provider, UPS. Its ground network restructuring is well underway; and contract negotiations with UPS are ongoing.
DHL is sensitive to the impact this decision will have on its employees, on the employees of its current air services vendors ABX Air. Inc. ("ABX") and ASTAR Air Cargo, Inc. ("ASTAR") and on the southwest Ohio communities in the Wilmington area. DHL is committed to working with state and community officials there to assist employees and their families who will be affected by this necessary restructuring. DHL has already committed to provide in excess of $260 million in severance, retention, and health-benefits for the workforce in Wilmington. A minor portion of this commitment (approximately $35 million) is being made pursuant to contractual or benefit plan obligations of DHL, while the balance (approximately $225 million) represents DHL's effort to go beyond what would otherwise be required.
Immediately following the announcement on May 28, 2008, DHL held discussions with key officials to address the potential impact of its announcement on the local community. On June 4, the Global CEO of DHL Express, John Mullen, met with Ohio Governor Ted Strickland, Ohio Lieutenant Governor Lee Fisher, and several State legislators to explain our decision. He has also been in touch with concerned Members of Congress. On June 25, Dr. Frank Appel (Chairman and CEO of DPWN), personally committed to Ohio Lieutenant Governor Lee Fisher that DHL would consider measures to mitigate the economic impact on the employees and the community of Wilmington.
The proposed agreement with UPS, if consummated, would not involve any merger, acquisition or transfer of assets between DHL and UPS. It would be a commercial vendor contract for services between two separate companies, limited to DHL's airlift delivery and certain sorting services in North America. Similar vendor arrangements involving competitors are common in the transportation industry. For these reasons, among others, DHL believes the agreement would be fully consistent with U.S. antitrust laws.
The notion that DHL is abandoning the Wilmington Air Park facility after accepting more than $400 million in incentive benefits from the State is false. DHL was as induced to consolidate operations at the Wilmington Air Park, in part by the offer of incentives that the State has valued in excess of $400 million. DHL has received less than $6 million in incentives.
