Tuesday, November 11, 2008

DHL Pulls Back in the US

Apparently DHL just couldn't get big enough to compete with FedEx and UPS. It spent almost $10 B trying. Oligopolies often exist because of economies of scale. Those make it very difficult for a new entrant to the market to get big enough to be viable.

Global shipper DHL Express said Monday it may close a data information center in north Scottsdale as a result of the company’s decision to cease package-delivery operations in the United States.

About 610 DHL employees and 126 contract employees will definitely lose their jobs, with the layoffs taking place in stages beginning in January and continuing to mid-summer 2009, according to a DHL spokeswoman, who asked not to be identified.

Also

"We've invested a massive amount of money to break into the market and be a third choice, but reality . . . has just made it impossible for us to make it economically viable," John Mullen, global chief executive officer of DHL Express, said in a conference call.

He estimated DHL will have spent $10 billion from 2003, when it acquired Seattle-based Airborne Inc. to enter the U.S. market, to when it books the expenses of closing U.S. operations.

Mullen said competition with UPS and FedEx was more of a factor in the pullback than the poor U.S. economy.

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