DHL will slash U.S. operations

White and Weikel are Times staff writers

Struggling shipper DHL said Monday that it would close its 300-employee West Coast hub in Riverside County as it pulls out of the U.S. domestic shipping business, eliminating 9,500 jobs nationwide and closing most of its DHL Express service centers.

Deutsche Post, the Bonn, Germany-based parent of DHL, blamed the move on heavy competition from United Parcel Service Inc. and FedEx Corp. as well as severe financial losses stemming from the weak U.S. economy. It follows 5,400 U.S. job cuts the company had made earlier this year and will leave DHL with 3,000 to 4,000 workers in its U.S. express business.

“We are facing a tough challenge in the U.S. with enormous losses,” Deutsche Post Chairman Frank Appel said during a conference call with analysts. “The impact of them has been that we think we have to take even further massive actions.”

As of Jan. 30, DHL will focus on its international shipping business, which is “what we are the best at,” Appel said.


Because of losses expected to amount to $1.5 billion for its U.S. operations this year, DHL plans to close 18 U.S. airport hubs and shut all but about 100 of its 412 U.S. service centers. The company projected that daily U.S. package volume would drop to about 100,000 from between 1.2 million and 1.5 million.

For the Inland Empire, which once viewed DHL’s Southern California hub as an anchor that would help attract businesses and jobs, the news couldn’t have come at a worse time.

The cuts include DHL’s sophisticated distribution center at March Global Port, which sits on land that was formerly part of March Air Force Base.

Since 2005, DHL cargo planes have made four flights a day into March -- the only commercial flights into that airport. About 300 workers sort through packages and load them onto planes and trucks.


Now, those DHL employees will be added to the jobless ranks at a time when the region is suffering from a 9.1% unemployment rate, which is among the worst in the nation for large urban areas, Inland Empire economist John Husing said.

“One of the principal reasons for that high unemployment rate has been the collapse of the residential home construction industry,” Husing said.

“The whole business of cargo distribution has really slowed down, and when there is less of that, it really affects the express-shipping industry,” Husing said.

Laid-off employees will also find it hard to find jobs at DHL’s toughest competitors, UPS and FedEx, analysts said.


“No one has ever seen anything this bad before,” said Nathan Brochmann, an analyst who follows logistics, transportation and business services for William Blair & Co. in Chicago.

Brochmann said the express industry was suffering from steep declines in activity among manufacturers and purchasing managers who deal with the procurement of supplies.

The closure in Riverside County is a setback for efforts to redevelop the military base into a business center and commercial airport.

A coalition of local governments called the March Joint Powers Authority and private investors, including March Global Port, have been coordinating the development of surplus base property.


“We are not happy that DHL is leaving. We like big, yellow airplanes,” said Aaron Knox, a partner and co-manager of March Global Port, which has 300 acres at the airport. “But I think we will be OK. Our success is not contingent upon any one tenant.”

Knox said the site would retain a number of enticements that should attract business. In addition to about $8.3 million in runway and taxiway improvements, Knox said that private investors had spent more than $100 million on various airport projects, including the Meridian Business Park.

Coalition members said they were taking a long-term approach to developing the base east of Riverside, which has one of the longest runways in the western United States. Their prospects include business parks and operations that cater to corporate jets, commuter aircraft and private pilots.

“Who thought our global economy would go the way that it has?” said Perris City Councilman Mark Yarbrough, incoming chairman of the joint powers authority.


“This is a disappointment, but the good will eventually outweigh the bad.”

But not everyone was unhappy.

The news of DHL’s departure was greeted with relief by residents who live along the airport’s flight paths and by community activists who have battled airport authorities over aircraft noise and other concerns.

“We’re saddened about the people who are going to lose their jobs, but as far as the community is concerned, the nightmare is finally going to be over and we will be able to sleep again,” said Catherine Barrett-Fischer of the Community Alliance for Riverside’s Economy and Environment.


In May, DHL said it was closing one-third of its U.S. branch offices, reducing its workforce and developing an agreement with Atlanta-based UPS, the world’s largest package-delivery company, to take over air shipments for DHL, which currently contracts out the work to two air carriers. On Monday, DHL said it was still in talks with UPS.

DHL’s other U.S. operations -- global freight forwarding, supply-chain services and global mail -- aren’t included in the cuts, the company said. More than 25,000 people work in those divisions.

“We will definitely invest in this business going forward,” Appel said. “So the U.S. remains the key market for us. We are just leaving the domestic U.S. express markets.”