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Business

Deutsche Post Confident on U.S. Expansion

Deutsche Post chief executive Klaus Zumwinkel has reiterated his intention to make Germany’s former mail service monopolist a global player by cracking the lucrative U.S. delivery market.

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Deutsche Post is standing strong despite Germany's sluggish economy

Speaking at a press conference on Wednesday announcing the companies first-half earnings, Zumwinkel said business remained strong despite continued economic weakness in Germany.

Lower stamp prices were largely the reason for a 6.6 percent decline in first-half operating profit to €1.47 billion (€1.67 billion). However, net profit during the first six months of the year rose sharply from €155 million to €650 million a year ago, when the European Union imposed a €850 million fine for subsidizing parcel services.

Zumwinkel on Wednesday also reiterated plans to expand into the U.S. delivery market. But its designs on the lucrative American market, however, have sparked heavy criticism in the United States. And FedEx and United Parcel Service, the largest U.S. express delivery services, have launched a campaign to thwart Deutsche Post's expansion attempts.

Deutsche Post already operates in a number of countries abroad, including Japan and Great Britain, where it currently operates via its 50 percent subsidiary Securicor Omega Express. It has also shown intensive interest in the privatization of postal services in Austria and Denmark. But the United States market is proving more difficult to crack.

DHL as the key

As Deutsche Post is the direct owner of DHL Airways, a Miami-based airline whose biggest customer is DHL Worldwide Express, which is a unit of Deutsche Post, they argue that the German postal operator would be violating foreign ownership airline rules, if it saw through with its plans.

In addition, Deutsche Post is buying Airborne Express's U.S. ground services for $1.05 billion.

DHL Airways tried to defuse the dispute when it announced a U.S. investor group had purchased all the shares of the air carrier, thus putting it in the hands of U.S. share-holders. However, the U.S. Department of Transportation is examining the case. A decision is due in October.

Klaus Zumwinkel, Deutsche Post AG

Speaking on Wednesday, Klaus Zumwinkel (photo) said he was optimistic. "The Group will be strengthening its involvement on the U.S. express market in the coming months and following the merger with Airborne Express, we will rise to be the number three in the world's largest express market."

Cutting costs

Zumwinkel, who has pushed through an ambitious €1.4 billion savings plan aimed at nearly doubling group profits by 2005, said the program's €174 million in half-year savings were higher than planned.

Deutsche Post, he added, would post at least €2.9 billion in operating profits in the full year, €100 million more than expected. As a result, full-year profit would come in just under that of 2002, despite lower stamp prices which will result in €300 million off profits this year.

Cuts in postage prices plus the continuing crisis in the press market both contributed to a fall in revenues from Deutsche Post's classic mail services. These were topped by revenues from Deutsche Post's courier and express services which now form Deutsche Post's leading unit, increasing by 2.7 percent to €7.9 billion, in particular due to European business. Here, revenues grew by a record 4.4 percent, in particular in Germany and Spain.

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