On Tuesday, October 8th, I had the opportunity to attend and speak at the Parcel Shippers Forum in Chicago. I spoke on "Conquering the Big Supply Chain Picture." However, what I think is more relavant is what is happening with DHL. Here is what I know and I hope it helps you.

DHL’s Recent Activities in the US Market:

In response to shareholder pressure DHL has been forced to drastically restructure their approach to the Intra-US market. While DHL has continued to maintain their strong presence in international markets (particularly in Intra-Europe) moves, they have been hemorrhaging cash in the US market since their acquisition of Airborne Express. Shareholder sentiment has finally reached a critical point, and DHL is responding.

Some of the changes DHL is planning/making include:

* Outsourcing the majority of the airlift function to UPS. Negotiations of have been kept very much under wraps to this point, so the exact details of how this arrangement would work remain unclear. However, due to the way the DHL packages would be handled in the hubs, UPS would have a distinct though unintentional advantage in regards to delivery times.

* Pulling some “scores” of feeder flights

* Canceling partnerships with its two airline subcontractors, ABX and ASTAR

* Closing 60 or more terminals (most have been closed at this point)

* Outsourcing final delivery to zip codes serviced by the closing terminals to the USPS.

* Laying off 1,500 to 1,800 employees (in addition to the 600 laid off earlier in the summer).

* DHL Investor Relations recently indicated that 45% of DHL’s US sales force has been laid off. Industry rumors put the number at 80% to 90%. While these rumors are unsubstantiated at this time, I discussed this issue with a Wall Street analyst of a very reputable brokerage house at the Parcel Forum yesterday and he is hearing the same 80% to 90% I have heard.

* Moreover, in a Morgan Stanley research report dated 10/01/08 William Greene stated that, in regards to the UPS/DHL partnership “. . . we're becoming increasingly doubtful whether this contract will happen at all. DHL's US customers appear to be leaving at a rapid pace, and congressional anti-trust and labor concerns could stop the deal altogether.” If this deal does not go through in some form or another, DHL will be left with essentially no airlift capacity in the domestic US.

Some other issues of note include:

* DHL has declined to bid on the past five parcel RFQs enVista has issued.

* There are rumors (again, unsubstantiated) that DHL has contacted a number of their largest, least profitable shippers to exercise out-clauses contained in the pricing agreements. If these rumors prove accurate, it means DHL has come to the point where they are walking away from high volume shippers and lessening their overall commitment to the US market.

Special thanks to Joe Wilkinson (enVista Transportation Practice Manager) for pulling some facts for me. It will be intereting to see how UPS and FedEx pick up the additional package volume as a result of DHL's US domestic crash.

Always enMOTION,

Jim Barnes