Deutsche Post’s mail unit needs to cut costs

Cost cuts of three-digit-million-euro sum needed. Mail unit head confident to conclude wage talks quickly. The mail unit of Deutsche Post DHL needs to cut costs to avoid posting losses over the long run, the division’s head told Reuters on Sunday.

The unit’s profits could theoretically “melt like snow in the sunshine” without immediate action, Deutsche Post’s mail unit head Juergen Gerdes said, pointing to less mail traffic, no room to raise postal charges and maximised productivity.

The unit, which accounted for more than half of Deutsche Post’s first-half operating profit, could potentially post a loss over the long run if previous years’ trend continued.

The mail division needed to cut costs by a three-digit million-euros sum to keep profits stable, he added.

“We wouldn’t have to worry if it was only 20 million euros ($28.72 million),” Gerdes said. “We are facing a threat that is so large that we say we have to act now,” he added.

Deutsche Post said in May it aimed to negotiate longer working hours at the mail division, would try to postpone wage increases and shift some air mail to ground transportation to add around 300 million euros to annual earnings before tax and interest (EBIT).

Gerdes said he was confident to come to a conclusion in talks with the union quickly. “Both sides realise that we should have a solution by the end of the year,” Gerdes said, adding that he was in constant talks with the union.

The union has so far rejected the group’s proposal.