Tag: Courier/Express/Parcels

Rumors that have been circulating for awhile that DHL might leave the U.S. parcel market were given a boost recently from a couple of stock industry analyst reports and an interview with the CFO of parent company Deutsche Post.

CFO John Allan said Deutsche Post intends to retain “a significant presence in the U.S.,” but that the company is exploring many options for the business, such as giving up a controlling stake in its U.S. express division (DHL Express US).

Allan is the former CEO of Exel Logistics, which Deutsche Post acquired in 2005.

There have been reports that Deutsche Post has been in discussions with FedEx for some type of transaction. A few transportation industry stock market analysts have been lauding the potential for such a combination.

For example, in a research note to clients, UBS analysts called the potential deal “win/win on paper,” thought it warned, “Antitrust could be a major stumbling block with such a proposal, therefore an agreement doesn’t signal a done deal.”

Allan told a German newspaper, however, that a total sale of DHL in the U.S. is “very, very unlikely.” Many believe if any sort of deal is done, it is more likely to be with FedEx than UPS, since DHL compete globally with UPS more so than FedEx.

DHL had big aspirations for its parcel and express business in the U.S. after it acquired Airborne Express in 2003. The company has made major investments in sales, marketing and infrastructure in an attempt to penetrate the U.S. market, the world’s largest. It had to spend heavily to upgrade its ground assets in the U.S., which were modest compared to those of FedEx and UPS.

Today, however, DHL’s share of the express and parcel market in the U.S. remains about 9 pct, according to most estimates. Deutsche Post recently reported that is writing down the value of its U.S. assets by USD 887 million, and that its U.S. package-delivery business has incurred annual losses of nearly USD 1 billion.

There have been some successes, however. For example, DHL recently announced an agreement with Walgreen’s, in which it will set up shipping locations for small businesses and consumers at more than 6,500 Walgreens locations by the end of this year, similar to what FexEx offers at its Kinko’s print stores chain.

The U.S. experience is an exception for Deutsche Post, which in general has enjoyed solid growth and profits in the rest of the world. DHL enjoys strong positions in Europe and Asia. However, its stock price has lagged the market. The Wall Street Journal reports that Allan, relatively new to the CFO spot, is taking a look at DHL Express US in part to “mend ties with investors who criticized the company for focusing too much on empire-building at the expense of profits.”

The researchers at investment firm Bear Sterns believe Deutsche Post may shed its domestic U.S. express and parcel business, while continuing to serve U.S. shippers for goods going to international markets. That could argue for a hybrid strategy in which it sells a controlling interest in the U.S. operation, but maintains a stake to help feed its international services.