A little acquisition by a very big company sent a jolt through the U.S. trucking industry on June 1. Deutsche Post DHL finally did what many observers expected the logistics giant to do years ago: It acquired a U.S. less-than-truckload carrier.
Before DHL Express withdrew from the U.S. domestic package market, the company was widely expected to bid on a large LTL company with a national footprint that could be paired with its package operation, much as FedEx and UPS had done.
In the end, Deutsche Post DHL approached the U.S. heavy freight trucking industry from an entirely different post-recession angle with no direct connection to its parcel business, or even to DHL’s corporate infrastructure in the Americas.
The world’s largest logistics operator purchased Standard Forwarding, a relatively small — in comparison, miniscule — regional LTL player in the Midwest that emerged from bankruptcy protection after being acquired by its management last year.
The company will become an autonomous subsidiary of DHL’s freight division, reporting directly to DHL Freight CEO Thomas George in Germany, not any of DHL’s package, forwarding and logistics executives or divisions in the United States.
The DP DHL acquisition, however, may not be as much about LTL trucking as the importance of U.S. customers, and U.S. exports, to international shippers. That desire played out further last week when French forwarder Geodis Wilson acquired One Source Logistics, a Minneapolis-based freight broker.
“Taking over One Source Logistics is a first step in the company’s growth strategy in the U.S.,” said Philippe Gilbert, executive vice president. “With the extended link to domestic services in North America, we are able to satisfy the needs of a wide range of our air freight and ocean freight clients.”
DP DHL says it has no plans for additional trucking acquisitions — asset or otherwise — in the United States. But global companies of its size don’t buy other businesses for practice. Standard Forwarding could be the first step toward a larger network.
Standard Forwarding was the 48th-largest LTL carrier in the U.S. in 2009, with $58 million in revenue, according to SJ Consulting Group in Pittsburgh. The carrier operates 16 terminals in a five-state region centered around Illinois.
The nearest LTL carriers in size to Standard Forwarding that year were Midwest Motor Express, with about $62 million in revenue and 31 terminals, and Land Air Express of New England, with $57 million in sales and 13 terminals.
In comparison, DP DHL reported $64.2 billion in 2009 and $71.6 billion in revenue in 2010, earning $3.5 billion in net profit. In the first quarter, the German mail and logistics group’s revenue rose 6.9 percent year-over-year to $18.4 billion.
DHL Freight operates in 53 countries in Europe, the Middle East and North Africa, with about $5.5 billion in freight revenue in 2010 and about 11,000 workers.
“Freight is an area where we’re continually looking to invest and strengthen our network,” said Jennifer Pakradooni, a DP DHL spokeswoman in Miami.
DHL Freight offers truckload and LTL services and rail intermodal services, largely as a “broker of capacity.” Despite its overseas growth, “there isn’t an existing freight portfolio here in North America,” Pakradooni told The Journal of Commerce.
Standard Forwarding may be small, but it gives DP DHL a presence in the heavy freight industry in the U.S. industrial heartland at a time when manufacturing has been the backbone of the economic recovery, even if it’s a sluggish recovery.
Many LTL carriers in the same territory covered by Standard Forwarding reported strong manufacturing demand in the first five months of 2011, including Holland, the Michigan-based Midwestern regional subsidiary of YRC Worldwide.
Standard Forwarding started in 1934 as a dedicated carrier for John Deere, hauling parts between the equipment manufacturer’s Midwest factories, and Deere is still a customer. Like many Midwestern LTL players, the trucker is diversifying its customer base.
“Their customer base is very complementary to where we want to grow,” DHL’s Pakradooni said. She mentioned manufacturing sectors such as aerospace and automotive, consumer goods, life science and health care products and technology.
Exports are driving growth in many of those sectors. Deere, for example, is building factories in China. The manufacturer’s net sales outside North America surged 45 percent in the first quarter.
In its first quarter earnings report, Deere said it expects sales in western and central Europe to increase 15 percent this year. That type of expansion is sure to catch a German-based logistics provider’s attention.
Contact William B. Cassidy at firstname.lastname@example.org.