Interview with Jim Kelly, CEO of UPS

Question 1: Head of Deutsche Post World Net Klaus Zumwinkel recently said that his company’s biggest competitors.were not postal operators, but UPS, FedEx and TPG. Are the postal companies now your biggest competition or will they be?

UPS has multiple competitors in every business in which it operates, but the biggest is certainly the US Postal Service, followed by the foreign postal systems. Today, there’s much blurring of the lines
between private and government, such as is the case with DPWN and its ownership of DHL. We do not fear competitors but we do fight for an even playing field. UPS should not have to compete against a government monopoly using its monopoly income to artificially hold down rates where it competes with the private sector.

Question 2: Across the board, profits have been down. Can you explain why, and what repercussions this will have?

The first quarter saw UPS grow across all product lines, despite the challenges of an unexpectedly steep drop in CS economic activity. UPS’s international export volume grew 17 per cent, led by Europe with a 25 per cent increase.
The rapidly expanding logistics business showed a strong 45.5 per cent rise in revenues. And even in the US, volume for Next Day Air grew 3.3 per cent. That said, the US economy clearly slowed much faster than previously predicted and that was the main factor affecting profitability.

Question 3: FedEx and DHL have formed alliances with USPS, TNT has an obvious alliance with the Dutch PIT Post, and Deutsche Post owns a majority of DHL. Do you see alliances and acquisitions as a continuing trend?

I do see a continuing emphasis on alliances and acquisitions. That’s something any company should be constantly evaluating as part of its strategy. UPS has made many acquisitions in recent years and will continue to do so as appropriate to extend the range of services it offers customers.
Again, my concern in this arena is very simple — a government mail monopoly should not be allowed to compete unfairly against private industry anytime, anywhere. Competition is good. Unfair competition is wrong. If USPS or Deutsche Post want to compete against
private sector companies, they should not be allowed to use their governmentgranted advantages and monopoly monies to do so.

Question 4: What benefits do you believe alliances with postal operators can bring?

Refer to answer three.

Question 5: Do you forsee a bluring of definition between blurring of definition between the posts and the major express
companies?

Refer to answer three.

Question 6: What are your views concerning the liberalisation of the postal industry?

The postal industry should not be ‘liberalised’ if that means granting unfettered freedom to go after private industry without proper checks and balances on the monopolies. In the United Stated for example, the USPS borrows money at the lowest possible rate from the US Treasury; pays no local, state or federal taxes; is exempt from a host of federal, state and local regulations; operates its own police force, and actually sets certain rates for private carriers.
Then, it uses money from its first class mail monopoly to subsidise package shipment operations. That is simply wrong, and does not justify any ‘liberalisation’ that provides more latitude to compete unfairly. In Europe, the EC now has ruled that Deutsche Post separate its competitive activities from its monopoly operations because of questionable past practices. That’s one safeguard model. We’ll be watching closely to see how it works.

Question 7: How far would you like to see the postal industry open up and do you believe express companies could fulfil some form of universal service obligation?

Again, any ‘opening up’ of the marketplace must include strict rules regarding postal monopolies. As for universal service, UPS already serves every address in the USA and several other countries as well. In fact, we deliver to more homes than the US Postal Service.

Question 8: Some courier companies have been or are involved in litigation with postal organisations and against other express companies. Why so quick to turn to the courts?

Package delivery companies have not been ‘quick’ to turn to the courts nor hav they seen ‘quick’ action. The EU complaint against Deutsche Post was filed in 1994. The US Congress has been studying postal reform off and on for years and with Canada and Mexico, there are established procedures under NAFTA for resolving
disputes without going to the courts. That said, we will always go to court if necessary if we believe a postal system is abusing its monopoly and the law.

Question 9: Where do you see your company position in the global market and what are your ambitions for the next five years?

UPS has positioned itself well for longterm growth because it has recast itself to become an essential component of commerce. By that, I mean the company has already placed itself squarely in the centre of a supply chain revolution that’s going to define business success in the future. UPS has built an infrastructure that allows us to help customers with the flow of goods, the flow of information and the flow of money, all under one roof in a coordinated manner.
This coordinated approach means our customers can use supply chain management to drive down their costs and get products to market quicker. This means instead of a US$60 billion domestic transportation market, UPS now is competing in a US$3.2 trillion global supply chain market.

Question 10: To what extent do you wish to infiltrate the postal market; could express companies be accused of cherry picking?

At UPS, we always are focused on serving the needs of our customers. We want to be where they need us and where we can add value. Whatever the mode of transport, the size of the goods, the geography, physically or electronically, we intend to be there for our customers.