· Ongoing losses make restructuring of U.S. business necessary
· Proposed UPS contract is solely an airlift service agreement – not a merger
· DHL has agreed to provide a generous $260 million severance package, $225 million voluntarily, to impacted DHL, ABX and ASTAR employees
September 9, 2008 – Washington, D.C.-- Today, DHL Express Global CEO John Mullen testified before the House Committee on the Judiciary regarding the company’s potential contract with UPS for domestic air lift and related services. The proposed agreement with UPS is part of DHL Express’ U.S. restructuring aimed at enabling the company to remain a viable competitor in the U.S. market.
During the Hearing, Mullen stated that the pending deal with UPS does not violate antitrust laws and does not decrease competition in any way. He added that the contract is a pro-competitive vendor-services agreement for air and related services only. “DHL would retain complete control over every customer-facing aspect of the business and remain an independent and viable competitor in the U.S. air express delivery sector retaining full control over our ground operations, as we do today,” Mullen stated.
The potential execution of this pending agreement will affect DHL employees, as well as those of DHL’s current air service vendors, ABX Air and ASTAR Air Cargo at the Wilmington Air Park. DHL is sensitive to this situation and therefore has agreed to provide a generous $260 million severance, retention and other benefits, $225 million of this voluntarily, to impacted DHL, ABX and ASTAR employees.
Summary of the September 9th, 2008 written testimony of John Mullen:
On May 28th 2008, DHL announced a major restructuring of its express business in the United States. This restructuring, if completed, would address significant on-going losses in the U.S market, and, hopefully, allow DHL to remain a viable competitor in the U.S. air express business and to continue providing future employment opportunities in the U.S.
DHL has not taken this action lightly. Since 2003, DHL has invested over $5 billion building our presence in the U.S. market. DHL's objective was to offer to the business customer an alternative shipping option to the extensive domestic services offered by UPS and FedEx, which are the leaders in the U.S. domestic air express. However, despite DHL’s heavy investment and determined efforts to build credibility in the U.S. market, its air express volumes have declined over this period, due in part to the generally deteriorating market conditions in the U.S. overnight air sector. Meanwhile, DHL’s operating costs, especially jet fuel expenses, have increased dramatically. Even though DHL has taken a long-term view of its U.S. business, it cannot ignore the fact that these operating losses – about $5 million per day – are simply unsustainable for the company, its shareholders and for its employees.
On May 28, 2008, therefore, the company announced a restructuring plan for DHL Express in the U.S., consisting of two main elements: (1) the reorganization and consolidation of its domestic (ground) network, and (2) a possible shift of its domestic airlift and attendant sorting activity from its two current providers (ABX and ASTAR) to one single provider, UPS. Its ground network restructuring is well underway; and contract negotiations with UPS are ongoing.
DHL is sensitive to the impact this decision will have on its employees, on the employees of its current air services vendors ABX Air. Inc. (“ABX”) and ASTAR Air Cargo, Inc. (“ASTAR”) and on the southwest Ohio communities in the Wilmington area. DHL is committed to working with state and community officials there to assist employees and their families who will be affected by this necessary restructuring. DHL has already committed to provide in excess of $260 million in severance, retention, and health-benefits for the workforce in Wilmington. A minor portion of this commitment (approximately $35 million) is being made pursuant to contractual or benefit plan obligations of DHL, while the balance (approximately $225 million) represents DHL’s effort to go beyond what would otherwise be required.
Immediately following the announcement on May 28, 2008, DHL held discussions with key officials to address the potential impact of its announcement on the local community. On June 4, the Global CEO of DHL Express, John Mullen, met with Ohio Governor Ted Strickland, Ohio Lieutenant Governor Lee Fisher, and several State legislators to explain our decision. He has also been in touch with concerned Members of Congress. On June 25, Dr. Frank Appel (Chairman and CEO of DPWN), personally committed to Ohio Lieutenant Governor Lee Fisher that DHL would consider measures to mitigate the economic impact on the employees and the community of Wilmington.
The proposed agreement with UPS, if consummated, would not involve any merger, acquisition or transfer of assets between DHL and UPS. It would be a commercial vendor contract for services between two separate companies, limited to DHL’s airlift delivery and certain sorting services in North America. Similar vendor arrangements involving competitors are common in the transportation industry. For these reasons, among others, DHL believes the agreement would be fully consistent with U.S. antitrust laws.
The notion that DHL is abandoning the Wilmington Air Park facility after accepting more than $400 million in incentive benefits from the State is false. DHL was induced to consolidate operations at the Wilmington Air Park, in part by the offer of incentives that the State has valued in excess of $400 million. DHL has received less than $6 million in incentives.
DHL Express (USA), Inc.: Wilmington Air Park Expansion and Improvement:
State of Ohio and Local Incentives
* Estimated value per State of Ohio incentives offer letter dated June 15, 2004.
* Estimated value per State of Ohio incentives offer letter dated June 15, 2004.
** The State also offered to DHL in the letter setting forth the incentive package that it would expedite commencement and completion of construction of a bypass around the City of Wilmington. Planning for and scheduling of construction of the bypass is understood to have commenced before DHL ever became involved with the Air Park. Further, the bypass is a public improvement that should be of benefit generally to the traveling public and Wilmington area residents.
About DHL
DHL is the global market leader of the international express and logistics industry, specializing in providing innovative and customized solutions from a single source. DHL offers expertise in express, air and ocean freight, overland transport, contract logistic solutions as well as international mail services, combined with worldwide coverage and an in-depth understanding of local markets. DHL's international network links more than 225 countries and territories worldwide. Some 300,000 employees, including more than 40,000 employees in the U.S., are dedicated to providing fast and reliable services that exceed customers' expectations. Founded in San Francisco in 1969, DHL is a Deutsche Post World Net brand. The group generated revenues of more than 63 billion euros (more than $93 billion) in 2007. For more information on DHL, please visit www.dhl.com.
· Proposed UPS contract is solely an airlift service agreement – not a merger
· DHL has agreed to provide a generous $260 million severance package, $225 million voluntarily, to impacted DHL, ABX and ASTAR employees
September 9, 2008 – Washington, D.C.-- Today, DHL Express Global CEO John Mullen testified before the House Committee on the Judiciary regarding the company’s potential contract with UPS for domestic air lift and related services. The proposed agreement with UPS is part of DHL Express’ U.S. restructuring aimed at enabling the company to remain a viable competitor in the U.S. market.
During the Hearing, Mullen stated that the pending deal with UPS does not violate antitrust laws and does not decrease competition in any way. He added that the contract is a pro-competitive vendor-services agreement for air and related services only. “DHL would retain complete control over every customer-facing aspect of the business and remain an independent and viable competitor in the U.S. air express delivery sector retaining full control over our ground operations, as we do today,” Mullen stated.
The potential execution of this pending agreement will affect DHL employees, as well as those of DHL’s current air service vendors, ABX Air and ASTAR Air Cargo at the Wilmington Air Park. DHL is sensitive to this situation and therefore has agreed to provide a generous $260 million severance, retention and other benefits, $225 million of this voluntarily, to impacted DHL, ABX and ASTAR employees.
Summary of the September 9th, 2008 written testimony of John Mullen:
On May 28th 2008, DHL announced a major restructuring of its express business in the United States. This restructuring, if completed, would address significant on-going losses in the U.S market, and, hopefully, allow DHL to remain a viable competitor in the U.S. air express business and to continue providing future employment opportunities in the U.S.
DHL has not taken this action lightly. Since 2003, DHL has invested over $5 billion building our presence in the U.S. market. DHL's objective was to offer to the business customer an alternative shipping option to the extensive domestic services offered by UPS and FedEx, which are the leaders in the U.S. domestic air express. However, despite DHL’s heavy investment and determined efforts to build credibility in the U.S. market, its air express volumes have declined over this period, due in part to the generally deteriorating market conditions in the U.S. overnight air sector. Meanwhile, DHL’s operating costs, especially jet fuel expenses, have increased dramatically. Even though DHL has taken a long-term view of its U.S. business, it cannot ignore the fact that these operating losses – about $5 million per day – are simply unsustainable for the company, its shareholders and for its employees.
On May 28, 2008, therefore, the company announced a restructuring plan for DHL Express in the U.S., consisting of two main elements: (1) the reorganization and consolidation of its domestic (ground) network, and (2) a possible shift of its domestic airlift and attendant sorting activity from its two current providers (ABX and ASTAR) to one single provider, UPS. Its ground network restructuring is well underway; and contract negotiations with UPS are ongoing.
DHL is sensitive to the impact this decision will have on its employees, on the employees of its current air services vendors ABX Air. Inc. (“ABX”) and ASTAR Air Cargo, Inc. (“ASTAR”) and on the southwest Ohio communities in the Wilmington area. DHL is committed to working with state and community officials there to assist employees and their families who will be affected by this necessary restructuring. DHL has already committed to provide in excess of $260 million in severance, retention, and health-benefits for the workforce in Wilmington. A minor portion of this commitment (approximately $35 million) is being made pursuant to contractual or benefit plan obligations of DHL, while the balance (approximately $225 million) represents DHL’s effort to go beyond what would otherwise be required.
Immediately following the announcement on May 28, 2008, DHL held discussions with key officials to address the potential impact of its announcement on the local community. On June 4, the Global CEO of DHL Express, John Mullen, met with Ohio Governor Ted Strickland, Ohio Lieutenant Governor Lee Fisher, and several State legislators to explain our decision. He has also been in touch with concerned Members of Congress. On June 25, Dr. Frank Appel (Chairman and CEO of DPWN), personally committed to Ohio Lieutenant Governor Lee Fisher that DHL would consider measures to mitigate the economic impact on the employees and the community of Wilmington.
The proposed agreement with UPS, if consummated, would not involve any merger, acquisition or transfer of assets between DHL and UPS. It would be a commercial vendor contract for services between two separate companies, limited to DHL’s airlift delivery and certain sorting services in North America. Similar vendor arrangements involving competitors are common in the transportation industry. For these reasons, among others, DHL believes the agreement would be fully consistent with U.S. antitrust laws.
The notion that DHL is abandoning the Wilmington Air Park facility after accepting more than $400 million in incentive benefits from the State is false. DHL was induced to consolidate operations at the Wilmington Air Park, in part by the offer of incentives that the State has valued in excess of $400 million. DHL has received less than $6 million in incentives.
DHL Express (USA), Inc.: Wilmington Air Park Expansion and Improvement:
State of Ohio and Local Incentives
| Incentive | Offered by the State | Realized by DHL | Comments |
| Ohio Job Creation Tax Credit | $ 13,000,000* | $ -0- | Agreement has not been executed. If the vendor services contract is consummated, DHL is not expected to realize any benefit. |
| Ohio Job Retention Tax Credit | 66,000,000* | -0- | Agreement is understood to have been submitted to ABX; status is unknown. If the vendor services contract is consummated, DHL is not expected to realize any benefit. |
| Business Develop-ment (412) Grant | 2,000,000 | 2,000,000 | |
| Volume Cap Allocation for Tax-Exempt Financing | 300,000,000* | -0- | Volume Cap was not required for the type of tax-exempt financing available to DHL, and neither the Dayton-Montgomery County Port Authority nor DHL applied for or received any volume cap for the bonds issued by the Dayton Port. DHL is obligated to pay rent sufficient to pay all of the debt charges on the bonds issued by the Dayton Port. No governmental entity is liable for payment of this debt from its own resources. |
| Ohio Invest-ment in Training Program | 2,000,000 | 2,000,000 | |
| Employment Pre-screening Test and Recruit-ment Services | 729,760 | | Such benefit, if any, that DHL received by virtue of the State’s reimbursement to local government agencies for these costs was indirect and the value realized is not capable of precise measurement. The amount expended by the State for this purpose is not known. |
| Community Reinvest-ment Area | 17,000,000* | 600,000 | For tax year 2007, DHL received an estimated $600,000 abatement on real property taxes. |
| Ohio Enter-prise Zone Program | 9,660,000* | 1,000,000 | For various reasons, including changes in State law, DHL does not expect to realize more than $1,000,000 in personal property tax savings. |
| Roadwork Develop-ment (629) Account | 1,000,000 | -0- | Received by the City of Wilmington for public improvements. |
| Runway Fee Savings | 7,000,000 | | The savings on landing fees that DHL realized by choosing in 2004 to consolidate operations at the Wilmington Air Park, rather than at the Cincinnati/Northern Kentucky Airport in Covington, Kentucky, was a function of DHL’s acquisition, expansion and improvement of, and consolidation of operations at, the Air Park. The State of Ohio did not provide to DHL either cash or any credit against any payments that would otherwise be owing to the State. |
| OWDA Local Econom-ic Develop-ment Loan | 4,000,000 | -0- | Received by the City of Wilmington for public improvements. |
| TOTAL | $422,389,760** | $5,600,000 |
* Estimated value per State of Ohio incentives offer letter dated June 15, 2004.
** The State also offered to DHL in the letter setting forth the incentive package that it would expedite commencement and completion of construction of a bypass around the City of Wilmington. Planning for and scheduling of construction of the bypass is understood to have commenced before DHL ever became involved with the Air Park. Further, the bypass is a public improvement that should be of benefit generally to the traveling public and Wilmington area residents.
About DHL
DHL is the global market leader of the international express and logistics industry, specializing in providing innovative and customized solutions from a single source. DHL offers expertise in express, air and ocean freight, overland transport, contract logistic solutions as well as international mail services, combined with worldwide coverage and an in-depth understanding of local markets. DHL's international network links more than 225 countries and territories worldwide. Some 300,000 employees, including more than 40,000 employees in the U.S., are dedicated to providing fast and reliable services that exceed customers' expectations. Founded in San Francisco in 1969, DHL is a Deutsche Post World Net brand. The group generated revenues of more than 63 billion euros (more than $93 billion) in 2007. For more information on DHL, please visit www.dhl.com.
