UPS To Benefit From DHL Demise

May 28, 2008 11:44 a.m. EST

Atlanta, GA (AHN) -- Europe's biggest mail carrier is out-sourcing most U.S. operations to United Parcel Service as it tries to limit losses from its money-losing DHL division.

Deutsche Post announced its turnaround plan Wednesday, which will cost as much as $2 billion and savings about $1 billion a year for the Bonn-based company. DHL will cut as many as 1,800 jobs in the United States.

DHL was purchased by Deutsche Post in 2002 and U.S. operations were further expanded with the purchase of Airborne Express in 2003. But as Bloomberg reports, the express unit hasn't made a profit in the U.S. since then as it struggles to compete with Atlanta-based UPS and Memphis, Tennessee-based FedEx Corp.

In a statement, Deutsche Post said it would be more selective in smaller areas, instead focusing on increasing ground capacity.

UPS, the world's largest carrier, said it is working on a 10-year agreement with Deutsche Post that would provide the American company an additional $1 billion annually.