In light of everything, this has got to take the cake...thanks, DHL, for ruining a great company!
By Will Waters, International Freighting Weekly, Wednesday November 26, 2008
DHL has finally admitted to mistakes that contributed to the company’s US$10bn failure in the US domestic express market. Following this month’s decision to withdraw early next year (IFW, 17 November), a spokeswoman told IFW that it had learned major lessons from the experience of integrating US firm Airborne Express, which DHL bought in 2003. "One big lesson was that the management of Airborne Express should have been kept, " she said. It was something the company had already learned and applied, she added. "If you look at the integration of Exel, we kept John Allan as the head of the logistics business and that integration has been very successful." A former senior Airborne executive told IFW that DHL executives - many of whom had recently joined from TNT - took over the running of Airborne, with "a lot of international freight experience, but their domestic air freight knowledge and experience was limited, at best. "Would it have made the difference [between the success and failure of DHL’s US operations]?
"Who knows for sure? But one could argue that it wouldn’t have been nearly as bad if they had left the Airborne team intact." He said prior to the acquisition, DHL USA was losing around $200m-$250m per year, while Airborne posted $6m profit. "When they combined both, instead of heading towards the black they started almost immediately losing a lot more money, and it never stopped getting worse." DHL expects $1.5bn losses for its US express operations in 2008, which it hopes to bring down to $900m in 2009, stabilising at a $400m annual loss by 2010.
Another key lesson was the importance of remaining close to customers, said the DHL spokeswoman, "in order to give them what they want rather than what you think they want. "Airborne was not really in the premium segment of the market, but DHL wanted to be in that premium segment alongside FedEx and UPS, and we invested heavily to build a network to match that idea. "That is also why we have been able to take out so much capacity without much impact for customers - we had a network built for much larger volumes."
Frank Appel, CEO of parent company Deutsche Post World Net, said the total cost of DHL’s five-year experience in the US domestic market was €7.5bn (US$9.6bn), including the Airborne acquisition cost and $3.9bn in estimated restructuring costs in 2008 and 2009. But he insisted the Airborne purchase was the right decision at the time, just as pulling out of the US domestic express market was the right decision now. Although it had seemed vital to have a strong presence in the US domestic market, this had become less important.
"Don’t forget that the acquisition of Airborne was five years ago, and since then the dynamics of the global market and the relative significance of the [US domestic] market has dramatically changed, " he said. "Today we have a much stronger China and Asian business, and the European business has now been integrated. "Of course we would love to still be in the US domestic business. But if we can’t be profitable, we have to be realistic and spend our money where we are clearly stronger than our competitors, and where we are in a much stronger position than we were five years ago - in the international business."
By Will Waters, International Freighting Weekly, Wednesday November 26, 2008
DHL has finally admitted to mistakes that contributed to the company’s US$10bn failure in the US domestic express market. Following this month’s decision to withdraw early next year (IFW, 17 November), a spokeswoman told IFW that it had learned major lessons from the experience of integrating US firm Airborne Express, which DHL bought in 2003. "One big lesson was that the management of Airborne Express should have been kept, " she said. It was something the company had already learned and applied, she added. "If you look at the integration of Exel, we kept John Allan as the head of the logistics business and that integration has been very successful." A former senior Airborne executive told IFW that DHL executives - many of whom had recently joined from TNT - took over the running of Airborne, with "a lot of international freight experience, but their domestic air freight knowledge and experience was limited, at best. "Would it have made the difference [between the success and failure of DHL’s US operations]?
"Who knows for sure? But one could argue that it wouldn’t have been nearly as bad if they had left the Airborne team intact." He said prior to the acquisition, DHL USA was losing around $200m-$250m per year, while Airborne posted $6m profit. "When they combined both, instead of heading towards the black they started almost immediately losing a lot more money, and it never stopped getting worse." DHL expects $1.5bn losses for its US express operations in 2008, which it hopes to bring down to $900m in 2009, stabilising at a $400m annual loss by 2010.
Another key lesson was the importance of remaining close to customers, said the DHL spokeswoman, "in order to give them what they want rather than what you think they want. "Airborne was not really in the premium segment of the market, but DHL wanted to be in that premium segment alongside FedEx and UPS, and we invested heavily to build a network to match that idea. "That is also why we have been able to take out so much capacity without much impact for customers - we had a network built for much larger volumes."
Frank Appel, CEO of parent company Deutsche Post World Net, said the total cost of DHL’s five-year experience in the US domestic market was €7.5bn (US$9.6bn), including the Airborne acquisition cost and $3.9bn in estimated restructuring costs in 2008 and 2009. But he insisted the Airborne purchase was the right decision at the time, just as pulling out of the US domestic express market was the right decision now. Although it had seemed vital to have a strong presence in the US domestic market, this had become less important.
"Don’t forget that the acquisition of Airborne was five years ago, and since then the dynamics of the global market and the relative significance of the [US domestic] market has dramatically changed, " he said. "Today we have a much stronger China and Asian business, and the European business has now been integrated. "Of course we would love to still be in the US domestic business. But if we can’t be profitable, we have to be realistic and spend our money where we are clearly stronger than our competitors, and where we are in a much stronger position than we were five years ago - in the international business."
uke:
At least that service would actually do something.
