“This drastic move by the company will result in significant loss of jobs for our membership at DHL Express. We will do everything within our power to assist our members through this difficult time.” –Bill Hamilton, express division director, International Brotherhood of Teamsters
It’s been all over the news since early this morning, DHL’s massive pullback from the U.S. domestic shipping market, so forgive me if I am covering ground (no pun intended) already trampled extensively.
Yet this is a huge shift in market dynamics within the U.S. domestic express shipping industry. DHL might have been an also ran competing against the likes of United Parcel Service and FedEx Corp., but as a subsidiary of Germany’s Deutsche Post, it never lacked for fiscal muscle. However, ever-steepening losses from its U.S. operations – despite a major reorganization and restructuring earlier this year – convinced Deutsche Post to close up shop.
Though DHL takes pains to state it will retain a “presence” in the U.S. domestic market to support the company’s far more extensive and profitable international operations, its DHL U.S. Express arm is going to be a shell of what it once was. It plans to close all U.S. ground hubs and reduce the number of stations from 412 to 103 – eliminating 9,500 U.S. jobs at DHL Express on top of the approximately 5,400 positions already reduced since January. Those measures should allow DHL's U.S. Express business to reduce its operating costs from $5.4 billion to under $1 billion, a decrease of over 80%, according to John Mullen, global CEO of DHL Express.
“Making a decision that affects the lives of many dedicated employees is never easy, but this is the best path forward for our company,” he said in a press release.
Beginning January 30 next year, DHL said its U.S. Express business will focus entirely on its international offerings as it discontinues U.S. domestic-only air and ground services. The company does plan to retain 3,000 to 4,000 U.S. Express employees, yet they will be tailored to the needs of international express customers.
“DHL remains committed to the U.S. express market,” Mullen stressed. “A continued U.S. presence is essential to our entire global express network [as] close to half of our top 200 customers are based in the U.S., and U.S. trade lanes make up close to half of our global volume, and half of our global shipments touch the U.S. We are here to stay.”
He also noted that the pullback on its U.S., domestic operations won’t impact services offered by the other DHL/DPWN businesses in the U.S., such as Global Forwarding/Freight, Supply Chain/Customer Information Services (CIS) and DHL Global Mail. With more than 25,000 employees across the country, those divisions will continue to conduct their successful U.S. operations, Mullen pointed out.
“This is the right move for our U.S. Express operations given the current economic climate and for the long run,” he added. “Focusing our U.S. Express efforts on what we do better than anyone else – international shipping – serves the best interests of our customers, employees and shareholders around the world.”
The International Brotherhood of Teamsters is, understandably, angry about all of this. Over the past five years, they noted that DHL struggled to penetrate the U.S. domestic ground market – with operational missteps coupled with the failing U.S. economy contributing to $8 billion worth of losses for DHL since 2003.
“We are disappointed by DHL’s inability to avoid the pitfalls that have led to this decision,” said Bill Hamilton, the Teamster’s express division director. It’s no wonder, either, since the Teamsters banked on recruiting more members from DHL’s pool of workers to shore up its own ranks. Now those plans are pretty much in tatters, considering that over 14,000 jobs disappeared from DHL’s U.S. operations this year alone.
Frankly, I thought DHL had a shot at it. But you could tell things were really hitting bottom during their big restricting back in May when they forged a 10-year deal with UPS – a major competitor – for air cargo capacity. It was a tough decision, no doubt, done in the face of escalating fuel prices (which wouldn’t stop escalating until late July) but it signaled that DHL was dealing with major, major problems. Now we know the problems were just too big to overcome – an indication once again that the U.S. freight market is a rough place to make a living right now.