TNT Express to consolidate operations and cut jobs in new cost restructure

TNT Express has been elaborating on its corporate strategy in the light of the failure of the UPS bid. On Monday (25/3), the company articulated a strategy called “Deliver” aimed at improving its profitability in a tough market environment. The strategy is also designed to resolve the future of its problematic businesses outside of Europe.

The process of selling its Brazilian and Chinese domestic express business is – apparently – advanced, with the details of the sale of the business in China to be revealed “imminently”, whilst “preparations for the sale of Brazil Domestic have started”. Regarding its intercontinental airfreight operations, TNT Express says that it “is exploring options to reduce its exposure to intercontinental capacity… these will be carefully weighed against the return on the use of the aircraft, which currently covers cost.” However, most of this was already outlined in the annual results last month.

The new element of the strategy dealt with the approach to its core European market. This revolves around sharpening its focus on specific higher margin markets such as small and medium enterprises and single-source customers moving “higher weight parcels and palletised freight Express and Economy shipments, and International and Special Services products.” There was some mention of the growth of B2C, but from this statement it appears it is not yet a priority. What TNT Express does feel needs attention is the hardness of its rates which it will seek to impose more discipline on.

Yet, as Bernard Bot said in February, the core of this strategic outline concentrated on cost control and here TNT Express intends to focus on three areas. Firstly, the company wants to centralise and consolidate IT services on a regional basis. Secondly, TNT Express aims to decrease the number of hubs in its big European markets and Australia, complementing this with new transport networks. Additionally, the company is also looking to reduce headquarters and support expenditure. TNT Express aims to deliver a total reduction of €220m per year in costs from these moves. Ironically, the target of greater efficiency will require a capital investment of €175m in IT and infrastructure over the next two years.

Inevitably fewer depots and more efficient transport means a reduction in the workforce, estimated to be a loss of 4,000 jobs over the next three years. The cost of such redundancies will be an estimated €200m.