Talks between Deutsche Post World Net (DPWN) and FedEx over a possible cooperation deal for heavilyloss-making DHL Express USA have apparently failed, German newspaper Handelsblatt reported today. A
new US strategy is due to be presented in May.The newspaper cited ING Group bank analyst Axel Funhoff as saying that DPWN’s strategicpartnership talks with FedEx had “run into sand” since the two parties had not been able to find asolution that was attractive for both sides. The analyst said his information had come from sourcesclose to the companies.
This failure meant it would be difficult for DPWN to reduce quickly the estimated annual lossof DHL Express in the USA of about €500 million, he added. Other partners were not available and soDHL Express would have to focus on reducing its costs and improving its service quality instead.DPWN declined to comment on the report.
DPWN chief Frank Appel said at the annual financial press conference in early March that asolution for DHL Express USA was a top priority and a new strategy would be presented in May. Ithad previously been reported that DPWN was talking with FedEx over a strategic partnership, underwhich FedEx would take over some of DHL’s US operations in exchange for cooperation in Europe,where the US operator is less strong.
But Appel recently told German newspaper Frankfurter Allgemeine Zeitung that the group is notdependent on finding a partner in order to solve the US financial problems. “We have sufficientoptions to make significant progress on our own. But if there’s a partner that further improvesthis solution, we could also take him on board later on,” he commented. Appel reiterated that DPWNplanned to present a new US strategy in May.
Separately, FedEx CFO Alan Graf told Reuters that the company was monitoring the problems atDHL Express USA, and added that “there may be business opportunities for us there”. Graf also saidthat the slowing US economy meant that some customers had shifted package business from air-basedFedEx Express to road-based FedEx Ground, but the group was thus at least retaining customers atlower yields rather than losing them to rivals.
The US CEP market is largely consolidated with UPS and FedEx dominating the market ahead ofDHL Express and the US Postal Service, which focuses mostly on lower-value express and parcelshipments. USPS cooperates with FedEx in the express sector and provides home delivery for DHL’sB2C product. Should there be no deal with FedEx, other potential restructuring scenarios for DHLExpress could include a cooperation with USPS or large-scale outsourcing of collection and deliveryto smaller regional companies. This would allow DHL to reduce internal costs substantially and tofocus on business customers in the major US economic centres.
