The Germans Are Coming

March 1, 2003
With ever-firming roots in the US, there had been speculation that DHL Worldwide Expressowned by Deutsche Post just might offer serious national competition

With ever-firming roots in the US, there had been speculation that DHL Worldwide Express—owned by Deutsche Post — just might offer serious national competition for US-based integrated carriers UPS, FedEx, and Airborne Express. Speculation turned to fact on March 25 with the announcement that DHL had merged with Airborne Express, acquiring only its ground operations.

Norman Scherstrom, director of communications for Deutsche Post Worldnet in the Americas, says that although it was quite a leap from having no presence into becoming a major factor in the US market, some work had already being done.

“We’re testing a product right now,” Scherstrom told T&D prior to the announcement. “To make it work involves quite a bit of software, customer interface capabilities, and understanding what requirements would be to serve the market— how to shape an offering. That’s been proceeding nicely,” he said. Scherstrom noted that DHL is the leading service provider in much of the rest of the world, including the Middle East, Africa, and South America. Deutsche Post is restructuring and rebranding, he continued. The core of its business is in Europe, and it sees a lot of opportunity there. “When you have a world of opportunities, you can’t really seize them all, but you should try to pick the ones that are going to have the most meaningful impact on your global operations,” said Scherstrom.

DHL presently serves its US shippers with express services. These customers have been looking for other services, and there is a widely accepted practice in the industry of bundling. “We are unable to provide bundled services,” he said. “So, both for existing express customers and for new customers who are looking for express as part of a bundling option, we are exploring that capability.” That was the position before the announcement about the Airborne acquisition.

Organically, DHL would benefit if it could offer services that fit with its express business, and that is where it has focused its attention. Though early reports gave the impression that DHL was only interested in Airborne’s ground network, that’s not likely the case, says James Valentine, Morgan Stanley. The equity analyst foresaw DHL acquiring everything except Airborne’s airline.

DHL has its own airline operation in the US, though presently it may be little more than a charter on paper. This will help it bypass restrictions on foreign ownership of a US airline (presently limited to no more than 25%). To be effective, DHL would have to own more than 25% of Airborne, and if excluding the airline is what it takes, it has clearly done its homework and prepared its move to get it quickly into a position to begin to compete with UPS and FedEx (which together hold over 80% of the US domestic express/parcel market, according to Morgan Stanley).