STATE OF OHIO WANTS TO STOP UPS-DHL MERGER

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http://www.ajc.com/business/content/business/stories/2008/09/10/ups_dhl_ohio_fight.html
Ohio fights UPS-DHL deal at congressional hearing
September  2008 Washington — DHL and United Parcel Service officials Tuesday disputed claims by Ohio lawmakers that a pending deal between the two package delivery services amounted to a “de facto merger” that would devastate southwestern Ohio’s economy and drive up prices for customers.The deal calls for UPS to become the exclusive air shipper for DHL in North America. The UPS hub in Louisville, Ky., would handle DHL packages currently shipped into and out of Wilmington, Ohio, replacing ABX Air and ASTAR Air Cargo. The switch is expected to cost southwestern Ohio some 8,000 jobs.Burt Wallace, president of corporate transportation for UPS, said at a hearing of the House Judiciary Committee that under the agreement, “UPS will act as a vendor to DHL.”It “is not a merger or a joint venture; it is not an acquisition; it is not a consolidation,” he said. The two companies will “continue to compete independently. We will each price and market our own brands and services. We will not share profits, costs or information about pricing of services to each other’s customers.”“This is in no way a merger or an alliance,” agreed John Mullen, CEO of DHL Express Global. “It’s purely a capacity-sharing and outsourcing proposal.”

But Ohio officials weren’t having it.
The deal is “a de facto merger,” said Rep. Mike Turner (R-Ohio). DHL is “basically going to become UPS plus,” he said.It’s a “merger,” said Rep. Marcy Kaptur (D-Ohio).The deal is “one step removed from a direct merger,” said Ohio Lt. Gov. Lee Fisher.Sen. George Voinovich (R-Ohio), pointed out that current law would permit antitrust review only after the agreement went into effect and “after the likely competitive harm has permanently changed the competitive landscape.”Were the deal to go through, Voinovich said, ABX and ASTAR would likely scale back quickly. “If this occurs, it would be nearly impossible to return the market to the situation as it exists today,” he said.Kaptur also testified that if the deal were completed, DHL would be effectively reneging on promises it made to the city of Wilmington and the state of Ohio.

Wallace of UPS told the panel, “We understand the importance communities place on attracting and retaining employment opportunities for their residents. It is very important to note, in this regard, that the expected result of DHL’s restructuring would be to preserve approximately 40,000 DHL-related jobs in the U.S. that would otherwise be at risk.

“Furthermore the agreement with DHL will help to bring additional job security to more than 14,000 UPS employees in Ohio, and the 358,000 UPS employees in the U.S.”DHL’s Mullen said the decision to contract with UPS was not taken lightly. He said that after investing $5 billion to enter the U.S. market, DHL is losing $1.3 billion a year in a competitive market facing the stress of high fuel prices.“We’re a large company,” he said, “but no company can lose this amount of money and survive.” He said the proposal was the only option that would allow DHL, the U.S.-based shipping unit of German postal service Deutsche Post AG, to remain a viable company.

Ohio lawmakers have urged the Justice Department to investigate whether the deal would violate antitrust regulations.Both presidential candidates have met with regional representatives to discuss the proposal’s impact on Ohio, considered one of the most important states in the upcoming election.Tuesday’s hearing was the first scheduled on the proposal in Congress. The House Transportation and Infrastructure Committee has scheduled a hearing for next Tuesday. The U.S. Senate is also considering hearings on the proposal

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September 11, 2008 at 1:55 PM