DHL to cut 9,500 U.S. jobs

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NEW YORK (CNNMoney.com) -- Global delivery company DHL announced Monday that it was cutting 9,500 jobs as it discontinues air and ground operations within the United States.

DHL said its DHL Express unit will continue to operate between the United States and other nations. But the company said it was dropping "domestic-only" air and ground services within the United States by Jan. 30 "to minimize future uncertainties."

"We see [a] significant shortfall in the U.S. part of our express business due to the fact that the economy has weakened deeply," said Frank Appel, chief executive of DHL's parent company Deutsche Post World Net. "We have taken a massive action in the U.S."

"As you can imagine, this was not an easy decision," said Appel, speaking by webcast from corporate headquarters in Bonn, Germany. "It has a massive impact on jobs for our people."

Elias Sleiman, a quality control worker and one of 375 DHL employees at a shipping facility in Allentown, Pa., said the company has scheduled a 10:30 p.m. meeting to explain their fate.

"At the meeting they're going to be telling us the bad news," said Sleiman. "We don't know what's going to happen."

U.S. job losses have been mounting for months. On Friday, the Labor Department reported that the U.S. economy shed nearly 1.2 million jobs through October. Just in the month of October, the economy lost 240,000 jobs, raising the unemployment rate to 6.5%. Another 15,000 cuts were announced in the first week of November.

DHL's 9,500 job cuts are on top of 5,400 job reductions announced earlier this year. After these layoffs, between 3,000 and 4,000 employees will remain at DHL's U.S. operations, the company said.

The company also said it was shutting down all ground hubs and reducing the number of its U.S. stations to 103 from 412.

DHL said it was making the cuts to improve profitability and "to prepare the company for the economic challenges ahead."

The company said this latest action would add $1.9 billion to its restructuring costs, for a total of $3.8 billion over two years, most of it during 2008. The company said the cuts would reduce the annual operating costs of DHL's U.S. unit to less than $1 billion, from its current cost of $5.4 billion.

DHL's main U.S. hub is in Wilmington, Ohio, a town of about 12,000 people. Sen. John McCain, R-Ariz., visited Wilmington in August as part of his bid for the presidency, noting at the time that he was "deeply troubled by the specter of job loss confronting Wilmington" and the surrounding area.

DHL spokespersons said the cuts would take place nationwide and will not be concentrated in any one location. But there could be many non-DHL jobs on the line in Wilmington as well.

Because DHL isn't U.S.-owned, the company isn't permitted to make deliveries between U.S. airports. Instead, these services are currently performed for DHL by U.S.-based carriers like ABX Air, Inc. and Air Cargo Carrier, which are both also based in Wilmington.

As DHL scales down its domestic operations, it's working on a deal to outsource these services to UPS Inc., (UPS, Fortune 500) based in Atlanta. If the deal goes through, then UPS could transport DHL packages between U.S. airports, instead of ABX and ASTAR.

ABX and ASTAR depend heavily on DHL for their business. Joseph Teuchert, a 16-year captain on an ASTAR cargo plane and a spokesman for the "Save the Jobs" organization in Wilmington, said that if the UPS deal goes through, "you're going to see a minimum of 8,000 jobs gone from Wilmington."

DHL spokesman Robert Mintz told CNNMoney that the company is still "in full negotiations with UPS [and] expects to reach an agreement by the end of the year."

"If [domestic shipping] goes to UPS, then my job is probably gone," said James Garner, a shipping handler for ABX Air in Wilmington.

Michele Nadeem, vice president of corporate communications for DHL, said "a great number" of the non-DHL workers "will be affected" by the job cuts, but she wouldn't say how many.

DHL's pullback in the U.S. should help not only UPS but also competitor FedEx Corp (FDX, Fortune 500), said Donald Broughton, analyst for Avondale Partners.

"Obviously, it's good news for FedEx and UPS, because this puts the 3-4% market share that DHL had [for domestic ground and air shipping within the U.S.] up for grabs," said Broughton. "Makes it a jump ball, if you will."

UPS shares rose more than 3% in Monday trading, and FedEx shares rose about 2%. Both outperformed the Dow Jones industrial average, the Nasdaq and the S&P 500, which declined.