Will Deutsche Post shed DHL Global Forwarding?

The true costs of last year’s failed experiment with DHL Global Forwarding’s new IT system called “New Forwarding Environment” are starting to be felt nearly a year later as its parent company, Germany’s Deutsche Post, said it is considering getting rid of the troubled forwarding arm altogether.

Because of the failed IT rollout, Deutsche Post endured a US$388 million write-down, which resulted in a 71 percent drop in third-quarter core earnings to $222 million. That bitter pill, Reuters reported, could result in Deutsche Post either spinning off the forwarding operation, which would allow it to focus on its express and mail business, selling it off or forming a partnership with a third party.

“The unit has had massive margin problems of late, among others, due to IT troubles, so it’s natural that Deutsche Post is mulling ways to turn it around,” an unnamed source told Reuters. One potential option is a sale to Japan Post, which purchased Australia’s Toll Holdings last year, with ambitions to expand.

The freight forwarding unit lost $379 million in the third quarter of 2015; in the same period of 2014 it made a profit of $80 million. The forwarding arm’s profit for the full year in 2014 fell 39 percent to $331 million on sales of $17 billion, which was nearly 27 percent of the group’s sales.