Copyright 2003, Traffic World, Inc.
DHL Worldwide Express officials are circulating a white paper on Capitol Hill that lays out their case for defending DHL Airways' corporate U.S. citizenship. Although the five-page report does not specifically mention DHL Airways and the citizenship review under way at the Department of Transportation by DOT Chief Administrative Law Judge Ronnie Yoder, the paper's late May release coincided with when the case began to receive public attention.
The paper paints parcel delivery competitors FedEx and United Parcel Service as protective bullies, while portraying DHL Worldwide Express as a bit player on the U.S. delivery scene. UPS and FedEx officials counter that while DHL may possess only a small share of the U.S. market, the company is far larger and more competitive around the globe than it is here.
Incorporated in Delaware, DHL's U.S. arm of DHL Worldwide Express is a U.S.-based, wholly owned subsidiary of Deutsche Post World Net. Deutsche Post, the privatized German post office, became a public company in 2000. It still is largely owned by the German government, but after paying a stiff fine in January for previous subsidization wrongdoing, Deutsche Post officials say they have learned their lesson.
The white paper titled "DHL Worldwide Express Does Not Compete Unfairly in the U.S. Parcel and Express Delivery Market" briefs readers on the corporate history of DHL Worldwide Express. The paper argues that because the company adheres to strict self-regulation as well as outside scrutiny, it could not receive an unfair or illegal advantage through cross-subsidization from the German government.
But representatives of FedEx and UPS criticized the paper as not being thorough, saying it glosses over the history of conflict between the parent company and the European Commission and European Union.
"There's not complete information provided on those critical issues," UPS spokesman David Bolger said. "I think it's a distortion of facts as to their size and scope as well as the history of the European Commission as it pertains to them."
FedEx spokeswoman Kristin S. Krause said the paper doesn't change her company's opposition to DHL Airways, a partially owned subsidiary of DHL Worldwide Express, holding U.S. corporate citizenship. Krause reiterated FedEx's position that even with a planned change in ownership of DHL Airways, FedEx still will oppose DHL Airways' U.S. citizenship on the argument that it is effectively controlled by foreign entities. An all-U.S.-citizen investor group led by new DHL Airways Chairman and CEO John Dasburg announced in late April that it plans to become the 100 percent owners of DHL Airways.
"Nothing has changed at all yet," Krause said. "And the fact that they're going to have a new owner sitting at the helm does nothing to change the basis of the company. Obviously we take a very different point of view on this, and we're looking forward to the public hearing that's deserved."
The paper, released by Deutsche Post World Net USA Inc. President and CEO Wolfgang Pordzik, sheds a different light on DHL's chief U.S. competitors.
"DHL's presence in the U.S. is not the result of a plot hatched in Germany, though its competitors seek to portray it that way," the internally written paper reads. "UPS and FedEx would like to eliminate DHLWE as a competitor in the U.S. market that they dominate so completely."
DHL Worldwide Express is in the process of working to acquire most of Airborne Express, the third-largest parcel delivery company in the United States. The $1.05 billion deal is for the Seattle-based Airborne Express, with the exception of its planes and a handful of associated facilities and services.
The paper includes a one-page appendix on the penalties Deutsche Post paid earlier this year. The fine of 572 euros translates in January's exchange rate to approximately $608 million. Deutsche Post repaid the money plus interest to the German government.
Prior to 1995, Deutsche Post was a German government agency, similar to the U.S. Postal Service in the United States. In 1995, Deutsche Post was changed into a joint stock corporation that the German government wholly owned. The company began to go public with a 1999 initial public offering of 31 percent of its shares. The European Commission found that prior to the IPO, the company improperly used government subsidies to fund its commercial parcel business. As part of the settlement that included the fine, Deutsche Post created a separate company, of which DHL Worldwide Express is a subsidiary, in an effort to erect a firewall between some of its various operations.
In the separate DHL Airways citizenship case pending at the Department of Transportation, Judge Yoder denied a June 4 DHL Airways request to delay the proceedings. The company wanted a delay to work out more details of the Dasburg acquisition, but Yoder ordered that the case proceed on the set timeline, which requires him to offer an opinion on citizenship by Oct. 31. A hearing is scheduled for Aug. 19 at DOT headquarters in Washington.