DHL Cuts 9,500 Jobs in U.S., and an Ohio Town Takes the Brunt
When the owner of the big shipping company DHL U.S. Express announced on Monday that it planned to cut 9,500 jobs in the United States, the news hit this town the hardest.
Wilmington is home to a sprawling distribution hub, and more than 7,000 jobs will disappear, devastating the local economy.
“This is a catastrophic event for the entire region,” said David L. Raizk, the mayor of Wilmington, a city of about 12,000 just 40 miles north of Cincinnati. He said that 20 percent of the region’s businesses depended on the hub and would most likely close.
The move was a sharp reversal for Deutsche Post, the German company that owns DHL, which had said that it was planning to maintain its American operations by turning over its domestic air-cargo service to its rival United Parcel Service.
The express package business has been suffering under the sharp economic downturn: express shipments in the United States carried by the top three companies fell in the third quarter for the first time since the 2001 recession.
The company, which cut 5,400 jobs this year at DHL, will discontinue its domestic-only air and ground services in January to focus entirely on its more lucrative international offerings. DHL said it would close its U.S. Express ground hubs and reduce the number of stations to 103, from 412. It said it would retain 3,000 to 4,000 employees to serve its international express customers.
The deepest cuts will be in Wilmington, where DHL built the hub in 2005 on a former Air Force base with the help of a $400 million state and local incentive package. DHL operates the hub in conjunction with Astar Air Cargo and ABX Air, both of which will most likely cease operations there when DHL leaves.
Clinton County, where Wilmington is the county seat, is facing a $2 million gap in a $14.5 million budget because of the loss of tax revenue. “We’re going to be taking 2009 needs and trying to fund them with 2005-level revenues,” said Randy Riley, the county commission president.
Hubs in Allentown, Pa., and Riverside, Calif., are also scheduled to close, as well as 18 regional sorting centers. The move is expected to reduce operating costs to less than $1 billion, from $5.4 billion. DHL U.S. Express expects to lose $1.5 billion this year, excluding one-time expenses.
Deutsche Post had ambitions of competing with FedEx and U.P.S. after acquiring Airborne in 2003 and combining it with DHL. But it was unable to rise above third place in the North American overnight delivery business.
Completing the cutbacks depends on successful negotiations of the outsourcing plan with U.P.S., said Jonathan Baker, a DHL spokesman.
“It has been an extremely tough year for the express business in the United States and for the shipping industry as a whole,” he said. “More must be done now to protect our interests, and we’re going to focus on what we do better than anyone else, and that’s international shipping.”
DHL’s plans may pre-empt a Justice Department antitrust investigation into the deal with U.P.S. Senators Patrick J. Leahy, Democrat of Vermont, and Sherrod Brown, Democrat of Ohio, asked for an investigation in September. But Mr. Brown said in a conference call on Monday that the inquiry may be moot.
He wants quick action on federal aid to retrain workers and provide other help for the thousands who lose their jobs and said he would press DHL to help Wilmington financially.
The city wants to purchase the airport and attract new businesses but needs help. “DHL really owes something back to the community, to say the least,” Mr. Brown said. “I’m hopeful that it will be a good citizen and turn over the air park with some subsidies.”
Wilmington has been bracing for sweeping job cuts since DHL announced its proposed deal with U.P.S. in May. The more drastic decision to end all domestic air and ground shipping was a desperate move that some still hope to reverse.
Joe Teuchert, a 16-year Astar cargo pilot and spokesman for Save the Jobs, an organization of community advocates, called the deal with U.P.S. anticompetitive and said it should be blocked by regulators.
Mr. Teuchert estimated that as many as 1,500 jobs could be saved in Wilmington if the deal did not go through. If the deal is completed, he will be out of a job along with thousands more, a prospect he has been fighting since spring.
“I handle emergencies all the time,” he said. “I’ve never had an emergency situation like this.”