PostNord announces staff cuts for Danish operation

PostNord has announced that the number of employees in Denmark will be reduced by 3,500–4,000 over 2–3 years. In a statement sent to Post&Parcel today (8 March), PostNord said that the move was necessary in order to bring about profitability in the face of digitization.

“It is estimated that transformation of the Danish business will cost around SEK3bn and PostNord is in dialogue with the owners as to how the SEK3bn is to be financed,” according to the PostNord statement. “During the period of transformation, the Danish business is also expected to report an operating loss, although it is estimated that this can be financed via operational earnings.”

PostNord added: “In addition, to further secure PostNord’s competitiveness in all markets, the Group’s administrative costs are to be further reduced by more than SEK1bn over the next three years. This is expected to affect some 1,200 full time employees, including 500 that are already included in the transformation in Denmark. The major part of the cost-cutting program is to be completed no later than at the end of the 2019 financial year.”

The postal operator said that since 2000 the mail volumes in the Danish business have fallen by around 80% – and PostNord said that even though it has introduced “increased efficiency measures” and seen a reduction of around 3,000 full-time jobs since 2013, “this has not been enough”. For 2016, PostNord Denmark reported a loss of SEK1,910m including exceptional impairment losses.

As part of the planned new production model, PostNord Denmark will phase out its separate infrastructure for mail.

“Instead, the logistics infrastructure will also be used for mail distribution all the way to the individual mail carrier. At the same time, the production model for parcels and heavy logistics will be streamlined and developed to meet customers’ needs for better flexibility and transparency,” said PostNord.

“Once the transformation is complete, letters will be handled via two separate flows. A basic flow will handle letters for distribution within five days. Via the fast flow, letters will be delivered within 24 hours. Long term, our offering in the distribution of unaddressed direct marketing and local weekly newspapers will be changed since we no longer will be able to distribute unadressed direct marketing and local weekly newspapers on a specific day, as we know it today.”

PostNord President and Group CEO Håkan Ericsson commented: “Once the transformation of the Danish business is complete, we will have a scalable and financially sustainable production model that will make it possible to maintain the universal service with a profitable mail business, even with low mail volumes.”

Ericsson continued: “More than three years ago, PostNord laid out a Group strategy under which the Group was to be transformed from a postal corporation with a certain volume of parcel business into a competitive Nordic logistics and communication group with a close focus on the growing e-commerce sector. The strategy, which has been systematically implemented at a high tempo, is still the right one, but in view of the accelerating losses of mail volumes the pace of the transformation must be further increased. We are now taking further steps to secure PostNord’s competitiveness in all markets by cutting costs in our administration functions.”

While Sweden’s mail volumes are declining at a considerably slower pace than in Denmark, there is no room for complacency.

“The dramatic trend in Denmark shows that it’s a matter of great urgency that Sweden, too, should acquire a flexible system of regulation that can be quickly adapted to considerably lower mail volumes,” said Ericsson.

“The Swedish government has announced that a parliamentary bill introducing changes to the Swedish Postal Services Act will be presented in May this year. It is important that the bill should create better conditions for continuing to deliver a good postal service throughout Sweden under reasonable financial conditions.

“The steps that we are now taking to reduce the Group’s administrative costs are essential, irrespective of the problems in the Danish business. They are being taken to ensure continued, sustainable competitiveness, despite the rapid digitization and the tough competition that we face.”