Mail Shakeup Coming

Deutsche Post stocks fell 6 percent Tuesday after the company announced its 2007 earnings will fall short of predictions.

Europe's largest mail service provider has tried to diversify and take a more international approach in recent years.

At the same time, many other EU countries have dragged their feet on liberalizing their own mail monopolies. Deutsche Post said it's worried this attitude will put them at a disadvantage.

Domestic postal services in EU countries are scheduled to be completely opened to competition by 2009. The bloc also wants to open the market for letters under 50 grams (1.8 ounces) to private carriers and thereby get rid of state postal monopolies.

Deutsche Post CEO Klaus Zumwinkel has used profits from the traditional mail service to transform the company into a major player in the global transport and logistics market.

Still, delivering letters remains a vital part of the Deutsche Post. Even with the company's big push in recent years into international logistics, freight and express mail, normal mail delivery remains responsible for 25 percent of the company's gross income, and more than 60 percent of its profit.

Post wants liberalization

Zumwinkel ha said he is not against liberalization in the postal sector. In fact, he's betting on his company moving into liberalized postal markets of other EU countries. But he also said he worries about competition being distorted by unequal liberalization.

A date needs to be fixed for other countries to open their markets to competition, Zumwinkel said, adding that it doesn't bother him if Germany is one of the first to do so, but "the date must be fixed."

"We're saying: liberalization is good. Liberalization should be. But it must take place in lockstep in Europe," Zumwinkel added.

Zumwinkel said Deutsche Post would insist on reciprocity. If Germany opens its market, all European countries should do the same. Germany, the United Kingdom and Scandinavian countries have said they will allow foreign competition in their postal markets. France, Poland, Greece, Italy, Spain are among the European countries reluctant to give up their postal monopolies.

This reluctance goes against the idea at the basis of forming the European Union, Zumwinkel said. It was supposed to mean getting rid of tariffs and forming common markets.

"You can't say, 'I'm going to do this to you, but you can't do this to me,'" he said. "That's not how it works."

Deutsche Post employs 80,000 people in Europe to deliver letters. A 20-percent loss could endanger 32,000 jobs. Many postal employees are public servants, which makes it extremyl difficult for the Post to lay them off or cut their pay.

Delivering mail big business

It's not only the German postal service that is labor-intensive. In the European Union, 1.6 million people work as postal carriers. It is a $90 billion market.

Countries are concerned about issues like universal coverage as public postal carriers are required to deliver mail at acceptable prices to remote regions five days a week, even if it isn't profitable to do so.

Countries also worry that opening the market will lead to the tendency to find low-paid workers to deliver mail. This is already happening to an extent in Germany, with some private companies paying wages as low as four euros per hour to deliver parcels. Deutsche Post also takes advantage of cheap labor. Since 2000, the company has shed 34,000 part and full time positions, turning to subcontractors in some cases.

The German government has said despite other countries' reluctance to end their own letter-delivery monopolies, it will go forward with its plan to open its system to competition in 2008.