Report suggests DB Schenker may leave U.S. market
June 27, 2011 - LM Editorial
Reports out of Europe are indicating that Deutsche Bahn is contemplating shuttering its United States-based DB Schenker Logistics business, a third-party logistics and trucking and airfreight services provider.
This was initially reported in the Financial Times Deutschland. The report stated that Deutsche Bahn management is considering restructuring Schenker’s U.S. business but added a withdrawal is more possible. And it added that Schenker management was due to deliver a business update by mid July and Deutsche Bahn executives plan to take a decision on the future of its U.S. business by the end of the year, possibly as early as August.
A Transport Intelligence report said that unnamed sources within the company suggested that part or whole of its U.S. business could be closed or sold-off. This appeared to concern the domestic land and air freight business of the former Bax Global in 2006. TI added that documents which Financial Times Deutschland had claimed to have seen described a strategic review of the business carried out by an investment bank on behalf of DB Schenker which described the US business as too small and lacking in “pricing power”.
DB Schenker officials did not reply to queries from LM at press time.
But the company did issue a statement, indicating that it is not leaving the U.S. and will continue to be a significant logistics player throughout all of the Americas, including the United States.
Company officials pointed out that DB Schenker’s rankings in the U.S.-based international air and ocean freight operation are second and fourth, respectively, in the U.S. market, and its contract logistics and supply chain management business is fifth. The company’s North American domestic operation is made up of a dedicated airplane network and a dense trucking network, handling 2,000 departures per day, with growth occurring at a double-digit pace, the company said.
Schenker added that its domestic air fleet, which represents ten percent of its U.S. business, has been hampered by the recession and increasing fuel costs.
“We have, and continue to work on adapting the aircraft network to the market conditions,” says Heiner Murmann, CEO and President of Schenker Inc., in a statement. “In addition to the reduction of aircraft from 40 to the current 20 over the past several years, we are exploring ways to additionally adapt this part of the business to further address the market realities while continuing to serve our customers. We have a number of alternatives available including improving and restructuring the operation and/or partnering with other providers. We are currently studying the best option and will define the optimal path forward in the next two months.”
An industry source that declined to be identified told LM that the BAX purchase “has always been problematic for DB and they might give up [in the U.S. air freight business].” The source added that Deutsche Bank has been bothered by defections and Joey Carnes, former advisor to the Board at Schenker Deutschland AG
and former BAX president and CEO, who now serves as chairman and CEO of MIQ Logistics, is now directly competing against Schenker and has “also raided DB Logistics ranks.”
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