DHL to Cut 9,500 Jobs and Close US Service Centers

In this Aug. 12, 2008 file photo, a DHL delivery truck is parked next to a hot dog stand in New...

In this Aug. 12, 2008 file photo, a DHL delivery truck is parked next to a hot dog stand in New York. As the parent company of struggling U.S. shipper DHL prepares to release third-quarter results on Monday, Nov. 10, 2008, analysts and industry observers predict Deutsche Post AG will announce major changes in the network that's lost millions competing with rivals UPS Inc. and FedEx Corp. (AP Photo/Mark Lennihan, file)

(Mark Lennihan/AP Photo)

In a move that could greatly scale back a possible venture between UPS and Deutsche Post's DHL, the German company said Monday it will significantly reduce its air and ground operations in the U.S. and cut 9,500 jobs within the country.

The DHL-UPS deal was expected to last up to 10 years and infuse Atlanta-based UPS with up to $1 billion in annual revenue, if completed as first proposed in May.

UPS, the world's largest shipping carrier, has said the contract with DHL, which it has been working to finalize, would mostly involve the transport of DHL packages between airports in North America — not the pickup or delivery of DHL packages to customers.

If DHL made significant cuts to its ground operations in the U.S., it wouldn't necessarily affect UPS and DHL reaching a deal since their talks have solely involved air delivery of packages, not ground delivery. But Deutsche Post's announcement Monday went well beyond the elimination of ground products within the U.S. Deutsche Post said it will discontinue U.S. domestic-only air and ground products on Jan. 30 to focus entirely on its international offering.

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Deutsche Post, which cited heavy losses and fierce competition for its decision to curtail U.S. operations, noted it is not pulling out of the market entirely. It said its international shipping services to and from the U.S. would continue.

DHL competes with rivals UPS and Memphis, Tenn.-based FedEx Corp.

UPS spokesman Norman Black said his company would continue to work on an air-haul vendor contract with DHL. But, he added, "Today's announcement by DHL certainly could affect the size and scope of that contract. We'll go back into talks and see what develops."

Black cited the part of the Deutsche Post announcement in which it said it plans to stop offering air service between U.S. cities.

"By stopping that service, the only thing that's left is moving international packages once they get to the U.S. border," Black said. "That's a dramatically lower amount of volume than what they were originally talking to us about."