"We want to secure jobs"

Interview with Jürgen Gerdes, the Board Member at Deutsche Post DHL, responsible for MAIL

Deutsche Post DHL News: Mr. Gerdes, given the current trends in your business, do you still sleep well at night?

Jürgen Gerdes: Why shouldn't I?

Deutsche Post DHL News: The Mail Corporate Division, which is still the best performer in terms of profit margins at the Group, has experienced significant losses!

Jürgen Gerdes: That's true. But my job is to solve such problems, and we're working on them. This challenge has not paralyzed us. Just the opposite: The economic crisis is having a major impact on revenue and earnings at the Mail Corporate Division in particular. Dialogue marketing is a perfect example of this: Last year, companies in Germany spent about 30 billion euros on dialogue marketing media - this is 5 percent less than in 2007. And the situation continues to spiral downward. In the first half of 2009, dialogue marketing decreased more than 8 percent. With this drop, revenue declined as well. In contrast, the costs for personnel, equipment and vehicles are always rising. As a result, there is less profit left.

Deutsche Post DHL News: At the same time, competition from e-mail, text messages and cell phones is continuing to grow. Will the traditional letter soon be a thing of the past?

Jürgen Gerdes: Certainly not, at least not in coming decades. But the replacement of the traditional letter by e-mail is definitely having an impact. The mail market in Germany is shrinking by around 2 percent each year, and digital communications are the primary reason for this. This is a challenge for all providers of mail-delivery services, not just for us.

Deutsche Post DHL News: The pie is getting smaller, and you still have to split it up with the competition ...

Jürgen Gerdes: We have a completely liberalized market, and competition is increasing - there is no doubt about that. But we are still the market leader. Our share of the pie in 2008 still amounted to a full 88 percent. Our customers seem to be keenly aware that the company to go to in terms of coverage, reliability and quality is Deutsche Post. And you can be sure that we're not going to carelessly jeopardize this share.

Deutsche Post DHL News: But aren't you doing exactly that? Aren't you hurting quality by keeping letter carriers at home on Mondays right now and by closing mail centers?

Jürgen Gerdes: The truth of the matter is: In the summer months, there are simply fewer letters to sort and distribute. Given that, it doesn't make much sense to run the network at full speed. This is why one Monday shift has been dropped in 15 of 82 letter distribution centers - and we are sending fewer carriers out on Mondays as a result. During vacation time, this works without sacrificing quality. The first summer weekends during which these steps were applied have confirmed this. They went well, and our customers were satisfied.

Deutsche Post DHL News: This makes sense for the short term, but how do you intend to respond when summer is over and the number of letters also continues to decline in the future?

Jürgen Gerdes: Regardless of the current economic crisis, the drop in delivery volumes in the mail business ultimately can't be stopped. It would be irresponsible to ignore this and simply wait. We have to act now and take the right steps to ensure that our employees continue to have secure jobs. To do this, we need the support and understanding of employees and unions. This is particularly the case with painful but, in our view, necessary sacrifices such as longer workweeks or a delay of planned pay raises.

Deutsche Post DHL News: In the end, this means that employees will bear the brunt of these measures.

Jürgen Gerdes: We must lower costs, and we are not simply making employees bear the brunt of these steps. All costs are being reviewed, ranging from operations, sales, branches, marketing and IT to managers' salaries. Our employees do their jobs well and work hard. They ensure our unparalleled service quality. As a result, we want to secure their jobs and not take money out of their pockets.

Deutsche Post DHL News: All the same, you won't be able to maintain the earnings level just by cutting costs.

Jürgen Gerdes: That's right. But in our ranks we have a lot of "wide-awake" people with great ideas. In times of declining physical deliveries, we have to move forward. This is why we'll be investing in new products and services in coming years. It would be fatal to forgo investments now for cost-cutting and financial reasons.

Deutsche Post DHL News: What can we expect?

Jürgen Gerdes: We already have some new products with good prospects. They include the Handyporto and the Plusbrief Indivduell. A ground-breaking new product of the future is the "Letter on the Internet": With this product, we will combine traditional and digital communication. The registered customer will have the opportunity to write a letter using a computer or cell phone, and we will securely deliver it by electronic means. Or, if the recipient does not have network access, we will print out the letter and physically deliver it. We want to use this product to transfer the reliability and confidentiality associated with Deutsche Post to the Internet as well.

Deutsche Post DHL News: Aren't you cannibalizing your own business by taking this approach?

Jürgen Gerdes: No, only on the face of it. The fact is, if we don't become active in this area, others will. We can't stop the historical change in the mail market. But we are getting ready and tackling current problems. With innovative new products and the existing strengths of the traditional letter, we have a clear strategy that will ensure that the Mail Corporate Division will remain robust - this not only means being customer friendly but also strong in terms of revenue and returns.