DHL emphasizes UPS deal not a merger

DHL, UPS execs tell Congress the firms will continue to compete

By Dave Hannon -- Purchasing, 9/10/2008 11:59:00 AM

In testimony before the U.S. House Committee on the Judiciary, DHL Express Global CEO John Mullen emphasizes that its proposed air freight outsourcing deal with UPS is not the start of a merger and the two firms plan to continue to compete vigorously.

Critics of the deal are concerned that DHL’s closing its Ohio air facility will create job losses in that region and having two of the three major parcel carriers partnering would have a negative impact on competition in that market. DHL has agreed to a $260 million severance package for workers who would lose their jobs.

According to a statement released by DHL, Mullen tells the committee: “The proposed agreement with UPS, if consummated, would not involve any merger, acquisition or transfer of assets between DHL and UPS. It would be a commercial vendor contract for services between two separate companies, limited to DHL’s airlift delivery and certain sorting services in North America.”

Reuters reports that Burt Wallace, a UPS senior vice president, also appeared before the House panel. saying UPS would “simply act as a service provider" for DHL air services only. Ground delivery and other operations are not included. "It's our intention to compete vigorously with DHL,” Wallace says. “Any suggestion that UPS could somehow manipulate the way in which DHL packages move through our system to gain competitive advantage is simply untrue.”

Last week, the U.S. Department of Transportation decided the UPS-DHL deal does not constitute unfair practices.

See also: Web Exclusive: Tips to negotiating your small parcel contract