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Zumwinkel, Klaus 1943–

Klaus Zumwinkel
1943

Chairman and chief executive officer, Deutsche Post

Nationality: German.

Born: December 15, 1943, in Germany.

Education: University of Münster, business degree, 1969; Wharton School of Business of University of Pennsylvania, MBA, 1971; University of Münster, PhD, 1973.

Family: Married Antje (maiden name unknown); children: two.

Career: McKinsey and Company, 19741979, management consultant; 19791984, senior partner; Quelle, 19851989, CEO; Deutsche Post, 1990, CEO.

Awards: Industry Leadership Award, World Mail Awards, 2003; Manager of the Year, Business Manager, 2003.

Address: Deutsche Post, Zentrale, Pressestelle, Hausaddresse, Charles-de-Gaulle-Str. 20, 53113 Bonn, Germany; http://www.deutschepost.de.

Klaus Zumwinkel joined Deutsche Post in 1990 when the company was still completely state owned and operated. Under his direction Deutsche Post was privatized in 1995 and thence became one of the most profitable companies in the world. In transforming Deutsche Post from merely Europe's largest postal service into a global mail and logistics juggernaut, Zumwinkel placed himself at the center of controversy for his use of aggressive tactics in acquiring other delivery companies around the world. Since 1997 Deutsche Post spent more than $5 billion in acquiring 30 firms, including Danzas, Air Express International, and DHL International.

EDUCATION AND EARLY CAREER

After earning a business degree from the University of Münster in 1969, Klaus Zumwinkel attended the Wharton School of Business of the University of Pennsylvania, where

he attained an MBA in 1971. He returned to Münster and earned a doctorate in political science in 1973. Much of Zumwinkel's education was paid for with funds acquired from the sale of the lucrative chain of retail stores that his father had established following World War II.

Upon completing his education, Zumwinkel went to work for the financial-consulting firm McKinsey and Company, becoming a senior partner in 1979. Zumwinkel left McKinsey in 1984 to take over as CEO of Quelle, the largest mail-order house in Germany and one of McKinsey's clients. In 1989 he resigned from Quelle and accepted an 80 percent pay cut to become the chief executive officer of Deutsche Post, the German state-owned post office.

REINVENTING DEUTSCHE POST

When Zumwinkel assumed control of Deutsche Post in 1990, many of the employees were civil servants, including former communist apparatchiks from East Germany, whose jobs were guaranteed by the state despite the chronic inefficiency of their performance. Even before reunification incorporated the bankrupt East German post office, the German postal system had been in a shambles. Local mail often took as long as four days to arrive, and the post office was losing nearly $400 million a year. In less than a decade Zumwinkel transformed Deutsche Post from a stodgy and inept bureaucracy into a sleek and profitable growth company. By 2000 he had positioned his company as the leading international competitor of United Parcel Service (UPS), which with its market capitalization of $67.4 billion was the largest and richest postal and package-delivery company in the world.

Zumwinkel began his tenure at Deutsche Post by closing more than one thousand postal depots and replacing them with 83 technologically sophisticated sorting centers. He also eliminated 16,000 of the 30,000 postal retail outlets and slashed 100,000 jobs. He next began to acquire delivery companies throughout Europe and Asia as well as in the United States. Deutsche Post gained control of 30 such companies around the worldincluding at least one in every major European country and Air Express International and Global Mail in the United States. In March 1998 Zumwinkel paid an estimated $700 million to gain control of 25 percent of DHL International, the air-freight company based in Bermuda; Deutsche Post subsequently acquired the rest of DHL. By 2002 Zumwinkel was exploring possibilities for expansion into India and China.

Controversy surrounded Zumwinkel's acquisitions strategy from the outset. Criticssuch as spokesmen for UPSasserted that Deutsche Post was illegitimately benefiting from its postal monopoly in Germany, using that income to finance overseas expansion. In the New York Times the UPS director of public affairs David Bolger stated, "We welcome the competition but it's got to be competition that's on a level playing field. They don't exhibit that" (February 24, 2004). The European Union mounted an investigation into charges that Deutsche Post was receiving unfair state aid; in 2002 the company was ordered to repay the German government $1 billion in illegal subsidies. Deutsche Post appealed the ruling. Zumwinkel explained in Traffic World, "In the case against Deutsche Post our competitors are saying that we have used money from the reserved area so that we can have very low prices against our competitors. That is totally wrong. Until last year, Deutsche Post was losing market shares" (September 25, 2000). Such allegations notwithstanding Deutsche Post went forward with its initial public offering in November 2000, when the German government put 25 percent of the company up for sale.

GOING GLOBAL

In 2002 Zumwinkel declined an opportunity to become the chairman of the board at Deutsche Telekom, the largest German telecommunications firmand also a former state monopolyin order to remain at Deutsche Post. Deutsche Post employees had expressed concerns about possible changes in management; Zumwinkel decided to remain with the company especially in order to oversee the merger of domestic and international operations of DHL in an effort to challenge the dominance of UPS and Federal Express, not only in Europe but also in Asia and the United States. Zumwinkel characterized the program to integrate the company's various holdings and operations, which he hoped would increase profits by 40 percent to $3.06 billion by 2005, as the "logical conclusion" of the company's multibillion-dollar strategy to create a global logistics, express, and delivery network (Journal of Commerce Online, October 31, 2002). Known as STAR, Zumwinkel's plan cost approximately EUR 800 million ($990 million) to implement.

CONQUERING AMERICA

Under Zumwinkel's direction Deutsche Post, though still primarily owned by the German government, became a formidable multinational corporation with annual sales in 2002 amounting to $49 billion. Yet despite the reorganization initiated by Zumwinkel, penetrating the U.S. market would not be easy. By the end of 2003 DSL controlled a miniscule 1 percent share of the American domestic parcel market and was losing an average of $200 million a year in the United States. By contrast FedEx controlled 44 percent of that market and UPS 34 percent. DSL however did command 18 percent of the parcel market between the United States and foreign destinationsa solid foundation upon which Zumwinkel hoped to build.

FedEx and UPS were determined to resist what both companies regarded as the unfair incursions of DHL and its American subsidiary Airborne, which Zumwinkel acquired in March 2003 for $1.1 billion. The two American companies often charged DHL with regulatory violations. In 2003 lawyers for FedEx and UPS petitioned the Department of Transportation to ground DHL's airline, Astar Air Cargo, alleging that it was truly owned by Deutsche Post; U.S. law prohibited a foreign company from owning more than 25 percent of an American airline. Zumwinkel admitted, "UPS considers us the evil enemy" (New York Times, February 24, 2004). In December 2003 Burton Kolko, the administrative law judge at the Department of Transportation, rejected UPS and Fedex's petition, noting in a 39-page briefing that Deutsche Post had sold its interest in the airline to Astar's chairman John Dasburg. The ruling cleared the way for Zumwinkel to begin fashioning his American distribution network. He noted, "We want to be the number-one company in our field in the world. I think we can do it by 2005" (New York Times, February 24, 2004).

See also entry on Deutsche Post AG in International Directory of Company Histories.

sources for further information

Barnard, Bruce, and William Armbruster, "Deutsche Post Restructuring to Challenge UPS, FedEx," Journal of Commerce Online, October 31, 2002.

Davidson, Andrew, "Klaus Zumwinkel's Deutsche Post Is Spreading Across the Globe," Sunday Times (London), July 13, 2003.

"Deutsche Post Defends Closure of Post Offices," Die Welt, June 6, 2003.

"Deutsche Post Plans Asia Investment," JoC Week, June 3, 2002.

Echikson, William, Jack Ewing, and Inka Resch, "Who'll Get Stomped in Europe's Postal Wars," BusinessWeek International, May 31, 1999.

Ewing, Jack, "The World's Postman," BusinessWeek, September 29, 2003, p. 30.

Harnischfeger, Uta, "Zumwinkel Front-Runner for Deutsche Telekom," Financial Times (London), October 7, 2002.

"Klaus Zumwinkel Will Not Move to Deutsche Telekom," Suddeutsche Zeitung, October 8, 2002.

Krause, Kristin R., "What's in a Name," Traffic World, February 25, 2002, p. 27.

Landler, Mark, "German's Big Brown Delivery Van Contender," New York Times, February 24, 2004.

Parker, John, "We Are 'No. 1 in Logistics,'" Traffic World, September 25, 2000, p. 13.

"A Perspective from Europe," Wharton Alumni Magazine, Spring 2004.

"Pushing the Envelope at the Post Office," BusinessWeek, September 11, 2000, p. 22.

"Q&A: Deutsche Post's Zumwinkel; A Strategy of 'High Quality and Low Cost,'" BusinessWeek Online, June 2, 1999, http://www.businessweek.com.

Watts, Christopher, "The Yellow Machine," Forbes, September 18, 2000, p. 192.

Meg Greene

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