DHL faces severe cut of U.S. operations

LONDON – Deutsche Post on Monday said it’s closing most of its U.S. air and ground business as the delivery services firm suffers from the deteriorating economy.

Deutsche Post said it’s going to allow DHL to serve overseas clients from the U.S., but the group said it no longer will deliver U.S. packages domestically effective Jan. 30.

The move will lower its cost base from around $5.4 billion to $1 billion, though the restructuring will cost $3.9 billion, up from $1.9 billion in an original plan.

DHL’s 13,000 employees will be reduced to between 3,000 and 4,000, and 412 stations will be reduced to 103.

The rival of FedEx, TNT and United Parcel Service had already cut 5,400 jobs since January.

At a press conference, company officials, including chief financial officer John Allan, said the job cuts and location closures would be “clear across the country.”

A company spokeswoman said she could be no more specific about the effect on the company’s Spokane operations. An affiliated company, APX, flies DHL cargo out of Spokane International Airport. APX tonnage represents about 5 percent of the total handled at the airport.

“This is the right move for our U.S. Express operations given the current economic climate and for the long run,” said John Mullen, Global CEO of DHL Express. “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.”

More broadly, Deutsche Post’s profit rose to 805 million euros from 350 million euros after a 572 million euro court victory against the German government.

Underlying profit before interest and tax dropped 9 percent to 469 million euros while revenue rose 4 percent to 13.26 billion euros.

Its mail service provides the bulk of profits, representing roughly two-thirds of its profit before interest and tax. The Express unit that contains DHL reported a 46 percent EBIT slump, though profits rose outside the U.S.

It expects underlying EBIT of around 2.4 billion euros for the year and expects a net loss.

In late October, Deutsche Post reduced its EBIT forecast from 2.9 billion euros.

Underlying EBIT should grow in 2009 but it again declined to give an outlook.

Deutsche Post shares rallied more than 7 percent in Frankfurt. But the stock has lost more than half its value over the last 12 months.