DHL, the logistics and shipping arm of the world's largest logistics group Deutsche Post World Net, is likely to announce a cost-saving plan that could lead to 40,000 job cuts with nearly half coming from DHL's cargo unit in the US, according to media reports.
DHL's express unit, at its air cargo facility in Wilmington, Ohio, employs approx 18,000, while the rest are employed at its business partners in the country. The expected move may not indicate Deutsche Post's exit from the US although it faces tough competition from its rivals, UPS and FedEx.
The move could threaten employees who work in ground deliveries, drivers, shipping clerks, warehouse workers and even pilots who currently provide air service for some of DHL's shipments while the company's US logistics unit, which employs some 25,000 people, would not be affected.
Deutsche Post will announce its cost reduction plan along with releasing its third quarter results today, which are likely to be as high as $1.6 billion due to high fuel prices and competition.
In May, DHL had initiated a $2.6-billion cost cutting plan to curtail its operations in the US which has posted recurrent losses. The plan entailed a 30 per cent cut in its ground based operations within the US, but it was not successful due to the sudden economic downturn in the US.
Last month, Deutsche Post had cut down its earnings forecasts for both 2008 and 2009, saying it expects pretax profit to fall 8 per cent in the third quarter citing global economic downturn which has deteriorated markedly and also acknowledged the problem of frequent losses since 2003 after it acquired Airborne as also dwindling sales in the US due to tough competition from UPS and FedEx.
In May DHL and global its rival UPS signed a 10-year deal, which, even though not quite combining operations would enable them to use each other's localised network for carrying some their air packages, without diluting their respective brand identities. See: DHL in $1-billion outsourcing deal with global rival UPS
UPS has a similar arrangement with the US Postal Service and the deal would benefit DHL to cut most of its losses while UPS would stand to enhance its revenue by $1 billion.
Even thougth the deal involves air delivery of packages, not ground delivery, it helps cut its ground operations involving air consignemnts. Even with the deal pasing regulatory approval, nearly 8,000 jobs could still be lost at its air cargo facility in Wilmington, Ohio, from the closure of DHL's hub.
The logistics industry in the US is facing a huge decline due to the current ongoing financial crisis with the volume of packages shipped in the US by UPS, fell 3.4 per cent in the third quarter and expected to fall further in the all important pre Christmas season of the fourth quarter.
DHL, has also lost some of its clients in drug store chains and online companies to its rivals, UPS and Fed Ex and the company's expectations to break the monopoly of UPS and Fed Ex since it first entered the US market in 2003, did not materialise.
Ohio, which was a key battleground state for both the Democrats and the Republicans, has not taken the prospect of job losses too well with Senator, Sherrod Brown, sending a letter on Friday to DHL's CEO, John Mullen asking for information about layoffs in the Wilmington area.
Brown also called the US deputy secretary of labour, Howard Radzely to give emergency funds to assist workers and communities that could be affected if the DHL's proposed outsourcing deal with UPS goes through.