Germany’s big brown delivery van contender

When the German postal and package-delivery giant Deutsche Post announced last March that it would buy a smaller American service, Airborne, its timing could not have been worse.

War had just broken out in Iraq — an American-led campaign that Germany did not support. Deutsche Post's American rivals, United Parcel Service and FedEx, were busy painting the company as a predatory arm of the German government, bent on dominating the global delivery business through its state support.

"U.P.S. considers us the evil enemy," said the chairman of Deutsche Post, Klaus Zumwinkel. "We were going to attack them in their home market. All the sentiment was on their side."

But then the winds shifted. An administrative law judge at the Department of Transportation rejected a petition by U.P.S. and FedEx that it declare Deutsche Post's main cargo carrier in the United States illegal, because it was effectively controlled by a German company.

And Deutsche Post, far from opposing the war, began carrying mail to American troops in Iraq, through its courier service, DHL Worldwide Express. In November, a DHL plane narrowly missed disaster when it was struck by a shoulder-fired missile while taking off from Baghdad airport.

"We have a very good relationship with the Pentagon," Mr. Zumwinkel said in an interview here recently. "Naturally, it helps if you can help people who are dealing with difficult challenges."

A graduate of the Wharton School at the University of Pennsylvania and a former partner at McKinsey & Company, Mr. Zumwinkel, 60, needs little tutoring in the ways of American business or politics.

Next week, he embarks on a trip to the United States that will include meetings with analysts, bankers, investors, journalists and politicians — it has the unmistakable feel of a victory lap.

The Transportation Department still must consider the law judge's December ruling. But few people, including officials at U.P.S., expect it to be overturned. While they are free to appeal the judgment, the way is clear for Deutsche Post to set about building its American distribution network.

"We want to be the No.1 company in our field in the world," Mr. Zumwinkel said. "I think we can do it by 2005."

By some yardsticks, Deutsche Post is already the leader. It dominates the package-delivery business in Europe and Asia. With its acquisition of Airborne for slightly more than $1 billion, it is a respectable, if distant, No.3 in market share in the United States, after U.P.S. and FedEx.

The company's year-old headquarters — an elliptical 41-story glass tower on the banks of the Rhine River — symbolizes its ambitions. Designed by the Chicago architect Helmut Jahn, the Post Tower looms over the old Parliament and Chancellery buildings in the former West German capital.

With sales of 39.2 billion euros ($49 billion) in 2002, and 28.9 billion euros in the first nine months of 2003, Deutsche Post is bigger than either U.P.S. or FedEx. But Deutsche Post, which is majority-owned by the German government and a state-linked bank, trails U.P.S. in revenue from the delivery of packages. Mr. Zumwinkel casts an envious eye at U.P.S.'s vast American network, with its ubiquitous brown delivery vans.

"At the end of the day, we want to have the same kind of network in Europe that U.P.S. has today in the U.S.," he said.

Executives at U.P.S. are not likely to be mollified by such flattery. They contend that Deutsche Post is an unfair competitor that has used profits from its monopoly on local mail delivery in Germany to finance a multibillion-dollar acquisition spree, most recently in the United States.

"We welcome the competition, but it's got to be competition that's on a level playing field," said David Bolger, the director of public affairs at U.P.S. "They don't exhibit that anywhere they travel."

At issue in the United States are Deutsche Post's links to Astar, a cargo airline formerly known as DHL Airways. Astar derives the bulk of its business from DHL Worldwide Express. Until last year, it was 25 percent owned by DHL and, by extension, Deutsche Post. That is the largest stake a foreign company can legally own in an American airline.

Deutsche Post distanced itself from the airline by selling its stake to the carrier's chairman, John Dasburg, a former chief executive of Northwest Airlines. Mr. Dasburg changed the name from DHL to Astar Air Cargo.

But U.P.S. and FedEx argued that selling its shares did not deprive Deutsche Post of decisive influence over the airline. Mr. Bolger described the new ownership as "byzantine and maze-like combinations," which did not alter a basic fact: "Deutsche Post is still in control of Astar."

The administrative law judge, Burton Kolko, swept aside that argument in a 39-page ruling, saying that Astar was "so to speak, its own person." That means DHL can continue to use it as its carrier.

Mr. Bolger said that U.P.S. would watch Astar to see if it expanded its customer base beyond DHL. U.P.S., which is based in Atlanta, has not ruled out taking its case to the United States Court of Appeals. "We're fighting to the bitter end, and the bitter end has not occurred yet," he said.

When the legal campaign was at its peak, Mr. Zumwinkel sharply criticized the treatment of his company in the United States. Today, he says he was always confident in the American legal system.

"I know America, I lived there," he said.

With his beachhead secure, Mr. Zumwinkel can turn to challenges closer to home. Deutsche Post plans to spin off part of its savings bank, Post Bank, to the public this fall. The stock offering, managed by Deutsche Bank and Morgan Stanley, could be the biggest of the year in Europe.

The choice of Morgan raised some eyebrows in German banking circles because it came a few months after Mr. Zumwinkel joined the company's board. He said the two events were unrelated, and that he has known Morgan Stanley's chief executive, Philip J. Purcell, for 20 years.

Mr. Zumwinkel must also gird for the end of Deutsche Post's monopoly on mail delivery in Germany in 2007. After overseeing the integration of the East and West German postal services in 1990, the privatization of the combined entity in 1995, and a stock offering in 2000, he feels he is up to the task.

"We will lose a lot of market share in Germany," he said. "But what we lose in Germany, we want to gain in other countries."