TOUGH TIMES BRING ABOUT ODD BEDFELLOWS
Once upon a time there were four players in the local express package business; FedEx, UPS, DHL and Airborne. Now there are just two with Airborne being folded into DHL a few years back and finally earlier this year DHL domestic folding altogether. Both FedEx and UPS for years have valiantly fought through the courts attempting to prove that as a foreign-owned entity DHL used a sham smoke and mirrors deal to show the domestic fleet of aircraft was actually100% locally-owned. Presently Federal law only allows a foreign 25% voting shareholding of a domestic carrier. For over twenty years and tens of $millions later in legal fees spent by the big two battling to close DHL down as a local airline clogged up the courts’ time. In the end after losing more than one $billion with the merged Airborne/DHL entity, DHL domestically threw in the towel three months ago after trying hard to cut a deal with UPS.
After twenty years of being a customer of FedEx and a several year business relationship with UPS, I have come to the conclusion that FedEx is still just as an exciting company today as the day Fred Smith founded it in 1971. By contrast UPS with their ugly Pullman Coach brown trucks fares little better in image than does the poor old USPS. In fact my experience of UPS is it is run exactly like a government bureaucracy inside a totalitarian state. Now here is where I really start to have a huge laugh. It has come to my attention that UPS Airlines’ largest customer to Australia has become none other than DHL! With all that has gone on before, isn’t that amazing? I could imagine what Fred Smith’s answer would have been had FedEx been approached by DHL, “Get out of here, you must be kidding!”
Now my mind is boggling at what might transpire for the future so I am throwing in my two cents worth here. UPS and DHL have huge similarities and synergies. UPS has been a dog ever since it was listed on NYSE in 2001. Wall Street has always given the thumbs up to FedEx and contrastingly always handed two thumbs down to UPS. The share price over the years reflects the lack of interest by the investing community in UPS. I put it down to the fact UPS is a stogy company and just like a typical government department, heading nowhere. DHL is owned by Deutsche Poste which is firmly in the hands of the German government.
Where UPS is strong, DHL is weak and vice versa. In these difficult times, all governments are becoming investors/stockholders in troubled companies. Both UPS and DHL themselves are moving in the direction of becoming precisely that. Enter the German government, through DHL, with a takeover bid for UPS! FedEx may fight hard to stop DHL/UPS planes flying within the United States, but aviation law is now being relaxed around the world. I also believe regulatory approval is a given for such a deal to take place as President Obama’s administration has made it quite clear that the United States is up for sale to the lowest bidder. When DHL acquired Airborne, Airborne people who were not fired, decided anyway to make a quick exit. The great thing about a DHL takeover of UPS is the executive wing of both companies absolutely think alike and it is a merger that would create the largest international bureaucracy the world has ever seen.
As a marketing man par excellence, Fred Smith would be rubbing his hands in glee at the opportunity such a merger could create for his company. When times pick up, FedEx market-share would rise to levels making it the true darling of Wall Street and of all Americans.
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