What's Going on at DHL?  DHL/FedEx Merger Unlikely

At least one German source has reported that DHL is interested in selling its money-losing US operation to FedEx. However, most US observers are discounting this possibility, pointing to a more likely scenario-a restructuring of the US business to reduce losses, with the possibility of outsourcing some none-core functions. In fact, DHL announced earlier this week a global outsourcing of IT functions, including those in the US, to Hewlett Packard.  

Here are some reasons why an outright buyout by FedEx are unlikely:

• DHL execs in both the US and Germany have repeatedly stated that they are "strongly committed" to the US market. John Allan, DPWN CFO said yesterday: "The US Express business is a key management priority and we are looking at a variety of options to improve performance. In doing so, we are committed to maintaining a significant presence in the US market, which remains of strategic importance to the group."
• DHL USA just cut a separate, long term deal with Walgreen's.
• Approximately 40% of DHL's drivers are members of the Teamsters union. So far, FedEx has resisted efforts to unionize.

We have also heard that DHL's peak December season was slightly above expectations.