UPS/DHL's Talks On US Packages Ended
United Parcel Service and DHL have called off talks for UPS to handle DHL's US domestic package service, a spokesman said on Friday.
"UPS and DHL have mutually agreed to terminate their negotiations," the spokesman said. "UPS is in its quiet period before earnings and will have nothing further to say at this time."
The deal had been expected to generate up to USD$1 billion a year in revenue for UPS.
"We were unable to reach a conclusive agreement that was acceptable to both parties," said DHL spokesman.
DHL shut down its US domestic service in January with the loss of 9,500 jobs, citing the US recession and the challenges posed by taking on UPS and rival US package delivery company FedEx on their home turf.
A number of analysts had expected that the talks would fail. When UPS reported fourth-quarter earnings in January, company officials said the two companies were finding it "very difficult to reach an agreement."
Separately, Air Transport Services Group said in a statement on Friday that DHL Express had informed the company and its subsidiary ABX Air that DHL planned to move its US gateway and national package sorting operations to the Cincinnati/Northern Kentucky Airport from Wilmington, Ohio.
ABX now provides air transport and package sorting services at the Wilmington facility for DHL. UPS and DHL had been in talks to take over air transport services from ABX and another provider, ASTAR Air Cargo.
As those discussions have now collapsed, DHL will "continue under existing contracts" with ABX and ASTAR, DHL's Baker said.
Wilmington was the hub of DHL's venture into the US domestic package market. DHL entered the US market in 2003 with the purchase of Airborne, an acquisition that cost it billions of euros in losses.
Air Transport said that the transition to the Cincinnati-area airport would be complete by late summer and that DHL had stated all former and current employees would be encouraged to apply for jobs at the Cincinnati airport.
Baker said around 1,000 people would be employed at DHL's operations in Cincinnati.
"We believe this is the right size facility to meet our international (package) volumes," he said.
UPS closed down 2.27 percent or USD$1.27 at USD$54.65 on the New York Stock Exchange. Air Transport shares closed up more than 1 percent at 74 cents on Nasdaq.
