| SCDigest Says:
|The only real, albeit remote, possibility would be for some very large group of private equity investors to buy back the operations and try to reconstitute the old Airborne Express in some fashion, but the financial and market realities of that idea are very forbidding.
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The drama continues in DHL’s announced change in its North American strategy, which includes outsourcing its airlift operations to UPS and closure of its large sortation hub in Wilmington, OH. That operation employs more than 6000 workers directly and several thousand more that work in other companies that use or support the hub. The outsourcing to UPS would move the air operations of DHL from Ohio to UPS’ massive Louisville, KY hub.
Supported by politicians on both sides of the aisle and presidential candidate John McCain, the US Congress plans hearings in September on the proposed deal and how it might impact parcel shipping markets here. The stated concern revolves around the potential to reduce competition in the express shipping industry and other anti-trust concerns. However, DHL says it plans to sell and market its services in competition with UPS under the deal, dismissing charges it will reduce market competition. Regardless, it seems clear that the closure of the Wilmington hub and related job losses are the real drivers of political concern.
“This deal, if allowed to be completed, would have consequences beyond its devastating impact on our local, state and national economy,” said Mike Turner, an Ohio congressman in Dayton whose district includes Wilmington.
The planned hearings in fact come before DHL and UPS have even worked out a deal on the outsourcing relationship. At one point, DHL had said it hoped to have an agreement with UPS by the end of July, but now entering the third week of August, the deal has still not been completed. Some observers have questioned the strategy of announcing the outsourcing plans before the UPS deal was done, which may give UPS an advantage in the negotiations.
“Can’t Afford to Take $1.3 Billion Losses Forever”
Meanwhile, Frank Appel, CEO of DHL parent Deutsche Post, finally commented about the DHL controversy, after having been largely silent until now. He defended the move to outsource to UPS (and other announced changes) as necessary to enable DHL to remain in the US market and save tens of thousands of other jobs there.
He also wonders what the US Congressional actions can really achieve – given that the alternative for DHL is to shut down its North American operations completely. Appel said the company was losing $5 million per day in North America.
(Transportation Management Article - Continued Below)