Deutsche Post plans to save several hundred million euros a year at its mail unit as part of aradical restructuring programme to secure mail profits on a long-term basis, German media have
reported.The German business magazine Wirtschaftswoche claimed the company wanted to save up to €1billion a year, which would be more than five times more than the previously targeted €180 million.The Financial Times Deutschland, however, put the annual cost reduction total at “several hundredmillion euros”, in order to secure annual mail profits in the €1 billion range.
Named Project One, the new savings plan would be the biggest since the launch of the company’smail unit and was reportedly presented by Deutsche Post mail and parcels chief Jürgen Gerdes to 50top managers at a recent meeting, Wirtschaftswoche wrote.
Gerdes expects major gains from selling the company’s 350 postal outlets. Its former unitDeutsche Postbank AG has shown interest in acquiring 277 of these outlets for more than €100million while also taking over the employees concerned.
Moreover, Deutsche Post is considering joint deliveries of parcels and mail in selecteddistricts in a way it is already implemented in parts of Hamburg, northern Germany. In the longterm, the network of 82 mail centres and 33 parcel centres will also be reviewed, with thepossibility of several closures.
The company may even save on timely delivery. According to the law, it is obliged to deliver atleast 80% of letters within one day but it delivers 95%. If the rate sinks, the costs will bereduced as well. In the long run, the management will probably push for the postal law to bechanged. The goal would a five-day delivery eliminating mail delivery on Saturdays as part of theplan, according to the weekly magazine.
The 143,000 employees of Deutsche Post, about half of whom work in mail delivery, represent thebiggest savings potential. Even though no dismissals are planned until mid-2011, the company isincreasingly transferring work to its low-wage subsidiary First Mail that pays an hourly rate of€9.80. Deutsche Post, on the contrary, pays an average of €14 per hour.
The mail unit is still Deutsche Post’s most profitable business. In 2009, the group generated anoperating profit of €1.5 billion. But the mail business is shrinking due to e-mails and the risingnumber of competitors. Even though Deutsche Post plans to offer an electronic letter from Julyonwards to be sent digitally or by post, there is no guarantee that this will turn out to be asuccess, Wirtschaftswoche added.
