Labor Dispute

First Past the Post

Which will be delivered first? Source: DPA
Which will be delivered first?
  • Why it matters

    Why it matters

    The ongoing labor dispute at Deutsche Post could cost the company its long-held stranglehold on the German postal market.

  • Facts

    Facts

    • Deutsche Post delivery staff walked out in an indefinite strike on Monday.
    • The dispute is over the company’s move to hive off its delivery business to push down wage costs.
    • Parcel-service rivals such as Hermes and DPD are set to benefit.
  • Audio

    Audio

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An ongoing strike by delivery staff at Deutsche Post could end up costing Germany’s state-backed mail delivery company important bulk delivery customers.

The dispute over pay has until recently only really affected domestic letter deliveries, but a decision by the trade union Verdi to expand the strikes mean they are now also hitting Deutsche Post’s package business.

“We aren’t just receiving additional inquiries from Deutsche Post clients already familiar with us from smaller orders,” said a spokesman from rival delivery service Hermes. “Many firms that up till now exclusively used the Deutsche Post subsidiary DHL for shipping are now looking for a second package service for security reasons.”

The latest walkout began on Monday and follows a highly disruptive strike in April. It has seen an additional 6,500 workers – most from Deutsche Post’s letter and packages divisions – stop work. The festering dispute centers on Deutsche Post’s intention to create low-cost parcel-delivery subsidiaries staffed by workers who are paid below the rate agreed through current collective-bargaining deals.

“They expect management to be willing and able to end this conflict,” said strike leader Andrea Kocsis.

But that doesn’t seem likely at the moment. Jürgen Gerdes, head of Deutsche Post’s letter division, said it was “categorically ruled out” that the company would fulfill Verdi’s main goal of having Deutsche Post’s main wage agreement apply to the 49 new regional parcel delivery units that were spun off in April.

It appears as if online retailers are the most willing to switch delivery services.

The company set up the new subsidiaries with the sole aim of putting around 6,000 staff working in them on lower-paying contracts. Whereas a letter carrier earns on average €17.70 ($20) per hour, logistic sector wage deals are normally based on an hourly wage of just €13.

Deutsche Post, which used to have a monopoly on mail services as state-owned post office, hoped the move would push its wage costs closer to those of its domestic rivals Hermes, DPD or GLS. Those delivery companies rarely pay their subcontractors more than Germany’s new national minimum wage of €8.50.

Hermes, which is a subsidiary of German mail-order giant Otto, is trying to determine how much of Deutsche Post’s business it can take over. “We’ve invested millions in technology and branches,” said a company spokesman in Hamburg. “We are well prepared for it.”

It appears as if online retailers are the most willing to switch delivery services. Market-leader Amazon contacted Hermes far in advance in order to have a backup to DHL.

Smaller rival DPD is more reserved, however. “The prices for bulk service are hardly attractive enough to fill in for DHL,” said a spokesman.

DPD is instead hoping to dominate more lucrative markets, such as deliveries in specific time windows, or same-day delivery. The company, based in the Bavarian city of Aschaffenburg, already delivers packages for Amazon’s Prime service. But DPD is also hoping to benefit from the Deutsche Post strike. “We’re ready,” said a spokesman.

The labor dispute could melt away Deutsche Post’s lead over the competition. Currently, DHL accounts for 42.5 percent of package delivery sales in Germany compared to 18.8 percent for DPD and 12.5 percent for Hermes.

Deutsche Post said, however, it was still too early to talk of shrinking market share. Deliveries up till now have remained largely stable, with 85 percent of letters and 93 percent of packages delivered on time on Tuesday. “But nobody knows what will happen if the strike continues,” said a spokesman.

Right now, it certainly doesn’t look like there will be a speedy resolution. Both sides cancelled negotiations planned for June 16 after Verdi presented Deutsche Post with an ultimatum that the company promptly ignored.

 

Christoph Schlautmann covers the logistics sector for Handelsblatt. To contact the author: schlautmann@handelsblatt.com

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