Plans To Cut At Least 1,500 Jobs

German package delivery conglomerate Deutsche Post said Wednesday it will hire rival delivery service UPS to handle air cargo shipments in the United States, following years of losses at its North American operation.

The New York Times reports Deutsche Post will overhaul DHL at a cost of $2 billion. It will cost an additional $1 billion annually for UPS to take over North American cargo shipments, and the move will mean the loss of at least 1,500 DHL jobs.

Though profitable on a global scale, DHL's operations in America have never made money, due to fierce competition from FedEx and UPS. DHL has ranked a distant third in overnight delivery business in the United States, and is poised to lose $1.3 billion this year.

It's not yet known how many jobs will be lost at DHL subcontractors, which handle the bulk of the company's regional delivery services once the cargo is off the plane. It's a near-certainty there will be big cuts there, as well.

Despite the impact, however, one analyst said Deutsche Post's decision to shutter DHL "seems like the right approach."

"Management is admitting that they cannot stand face to face against FedEx and UPS on their home turf," added Christian Obst with Unicredit. "This is over now."

Deutsche Post bought out DHL in 2002, and followed that acquisition with the purchase of Airborne Express in 2003. The company's American hub is in Wilmington, DE.

The Bonn-based company stressed it is committed to serving US customers -- even if that means DHL forever loses money in the United States. UPS said the deal does not include the pickup or delivery of DHL packages to customers.

The deal must still clear anti-trust hurdles.

FMI: www.dhl.com, www.ups.com