Deutsche Post Ag Business Information, Profile, and History

Company Perspectives:

The Deutsche Post is developing into one of the leading mail communication and logistics concerns in the world. We offer our clients services of the highest quality at competitive prices. We match the expectations of a competitive market as well as the needs of a comprehensive national and international infrastructure. By further developing established products we solidify the trust put in us and establish a basis for introducing innovative services and expanding into strongly growing markets. Our entire value production is based on and regulated by state-of-the-art information technology.

History of Deutsche Post Ag

The Deutsche Post AG is the largest provider of postal services in Europe. The company offers domestic and international letter and parcel delivery services for the general public, as well as direct mail management, mail process outsourcing, and logistics consulting for businesses. Deutsche Post is owned by the German government and planned to go public late in the year 2000. It operates 173 subsidiaries and 14,000 post offices in Germany, delivering approximately 70 million letters every workday in 1998. Deutsche Post holds majority shares in private international delivery services and shipping carriers in Austria, Belgium, France, Italy, Poland, Switzerland, and the United States, as well as a 50 percent share in the British Securicor Omega Express Distribution division and a 22.5 percent share in the express delivery service DHL International Ltd. Deutsche Post is also active in the stationery retail and direct mail advertising markets through its private subsidiaries McPaper AG and Merkur Direktwerbegesellschaft. The Deutsche Postbank AG, a commercial bank formerly part of the old Deutsche Bundespost and owned by the German government, was taken over by the Deutsche Post in 1999 for DM 4.3 billion.

Origins of Postal Services in Germany: 1490--1800

The year 1490 is considered the founding year of the German post office, when German emperor Maximilian I ordered that a regular messenger service be established from Austria to the Netherlands, France and Rome, so that he would be able to efficiently reign from his Innsbruck headquarters over his realm, including the new possessions he gained through marriage. The first post line between Innsbruck and Mechelen in Belgium was established in the same year. Maximilian I assigned the organization of this network to the noble family of the Tassis (later spelled Taxis) from Bergano, North Italy, who had already experience in providing messenger services to various courts.

A relay system was established in which post riders traveled five miles between posts and communicated with each other by blowing a horn. They rode without interruption to the next post at an assigned location where they handed over the mail. Thereby a letter could be delivered the 920 kilometers from Brussels to Innsbruck in five days during the summer, and in six days during the winter. In the 15th and 16th centuries members of the von Taxis family settled in the main cities of Europe as their postal system was steadily enlarged.

In exchange for running the postal service system, the von Taxis family was paid an annual reimbursement by the different royal courts. However, due to weak state finances, wartime losses, and the failure of noble families to settle their debts, the von Taxis were not always paid properly, and they started looking for additional sources of income. Although not technically allowed to deliver anything but "royal mail," the Taxis posts also delivered for private customers beginning at the latest in 1506. Financial difficulties were accompanied by tough competition from already existing messenger systems, primarily those between specific cities and the so-called "butcher posts." Since butchers often had to travel to buy livestock, they traditionally served as mail deliverers and charged their clientele by the piece. When emperor Rudolf II made the messenger business an imperial monopoly in 1597 these conflicts were only partially resolved, since some of his local opponents ignored his edicts. Beginning in June 1600, the general post master Leonard de Tassis was officially permitted to collect fees for mail delivery from private persons. The head of the imperial post was always appointed by the emperor. In 1615, however, Lamoral von Taxis persuaded German emperor Matthias to grant him the right to provide imperial postal service and to make it inheritable. With this security, the von Taxis family had an incentive to invest into the system's extension.

As early as 1516 the postal system was used to transport people as well as to deliver information. The Taxis postal system initiated a postal ride system from Leipzig to Hamburg in 1660 and additional routes were added soon after. However, traveling with the postal coach was anything but comfortable and secure. Like the horse riding posts, the postal coaches were used regularly to transport money and other valuables in addition to the mail and were often a target for highwaymen.

The time it took to deliver mail did not change much between 1500 and 1765. However, innovations such as the introduction of home mail delivery, drop-off mail boxes, and postal stamps improved the service. The first regulation regarding mail delivery personnel was enacted in Prussia in 1770. Improvements in the postal infrastructure, such as improved roads, were often interrupted by wars and slowed down by disputes between the various regional governors until well into the 19th century.

Peak and End of the Taxis Post: 1806--67

At the peak of its success in the 18th century just before the French Revolution, the Kaiserliche Reichspost, run by the Thurn und Taxis family as it was then known, was the leading postal system in the Holy Roman Empire, serving 11.3 million people in an area of over 222,000 square kilometers. Transit postal routes also connected the empire to France, England, Scandinavia, Poland, Russia, and to the court of the Turkish Sultan. However, the Holy Roman Empire was dissolved as a result of Napoleon's campaigns at the beginning of the 18th century. When emperor Franz II renounced the crown of the Holy Roman Empire in 1806, the scene was set for a series of wars of liberation throughout Europe which made it increasingly difficult for the Thurn und Taxis postal system to survive.

The Southern German states, which had collaborated with Napoleon, dropped out of the Reichspost after the German Confederation of the Rhine was founded in 1806. In 1810, 43 different postal administrations were fighting for share of the territory of the former Reichspost. This competition at times even took the form of "postal wars," such as occurred in the state of Baden. Efforts to unify the German postal system at the Congress of Vienna, where the new European order was worked out after the defeat of Napoleon, failed. A newly established confederation consisted of 39 independent German states, many of which had their own weights and measures, currencies, and tariffs. By 1824, the Thurn und Taxis principality had reached almost 80 separate agreements and treaties with members of the new German states and other countries.

The two leading powers of the German confederation, Austria and Prussia, proposed the basic guidelines for a German postal association established in 1847. However, no agreement could be reached, and in 1850 the two states founded the German-Austrian Postverein, a postal association which other German states eventually joined. Thurn und Taxis negotiated new agreements with Prussia and Austria in 1850 and 1851, and between 1851 and 1865, five postal congresses were held to update already existing agreements which developed into a sophisticated system of postal law. After Austria's defeat by Prussia in 1866, the German confederation was dissolved and a number of formerly independent postal administrations were integrated into the Prussian system. This marked the end of the almost 400-year-old Thurn und Taxis postal empire. On January 28, 1867, an agreement was concluded in Berlin between the Thurn und Taxis principality and Prussia according to which Prince Maximilian Karl von Thurn und Taxis surrendered all his postal rights and possessions to Prussia, making the Prussian post office the largest German postal system.

Groundbreaking Technologies and World War I: 1868--1932

Although the history of the German post office was greatly influenced by the sweeping political change and man-made catastrophes of this period, it was most affected by the development of revolutionary new technologies that led to fundamental change in how messages were exchanged. Worldwide mail delivery was greatly enhanced, for example, by the introduction of steam ships. In 1886 the first postal ship left for the German colonies in East Asia. In 1870 it took mail from 25 to 30 days to travel from Western Europe to Shanghai, and about seven days to North America. However, one of the most important inventions--the electric telegraph, first used in Germany around 1844 and introduced as a postal service in the following decade--made it possible to cut those times down to two days and two hours respectively. Under the leadership of Heinrich Stephan, who became German Postmaster General in 1876, the new technologies were quickly utilized by the German Reichspost. Beginning in 1876, telegraph cable connections were set up between Berlin and 221 German cities, and by 1896 there were about 17,000 public telegraph offices in Germany. At the same time, realizing the immense potential of the new medium of the telephone for the exchange of messages, Stephan pushed through ambitious plans to introduce telephone service on a large scale. With two Bell telephones which he had received as a personal gift, he began experiments in Berlin and contracted his acquaintance, entrepreneur Werner Siemens, to begin manufacturing German telephones as early as 1877 when as yet no public telephone network existed. Three years later, when only a single city in the United States over 15,000 inhabitants was without long-distance telephone service, the first long-distance telephone center with eight users was opened in Berlin. However, the Berlin business world was slow to embrace the novelty and in 1888 the network only had about 9,100 participants. In the same year Stephan managed to secure the monopoly for the establishment and maintenance of telephone networks for the German Reichspost.

In 1870 the German Reich was established, and the new postal administration, the Reichspostverwaltung, began issuing postage stamps valid in all of Germany. Under the Bismarck's chancellorship, Prussian-dominated Germany underwent a period of fundamental political, technological, and social change which crucially affected the nation's postal system. Bismarck's struggle against the socialist movement by means of extremely restrictive legislation was accompanied by the establishment of a revolutionary system of social welfare which radically improved the lot of the common people. The Reichspost became the institution through which welfare payments were channeled and with the rising number of benefits such as disability insurance, pensions for the elderly, and later the benefits for surviving dependents, the postal system had to adapt to meet the new demand. This service was offered free of charge until 1921 and was performed by the post office until the 1950s and 1960s, when cash-free transactions replaced the cash payments. Despite protests by the banking lobby, in 1912 the Reichspost was also granted the right to offer money deposit accounts and accompanying services. By 1920, before postwar hyperinflation hit the German economy, the number of the so-called postal check accounts exceeded 620,000 with deposits of 4.7 billion German Marks.

Beginning in the middle of the 19th century, railway transportation had become more and more popular and successively replaced horse carriers. Mail could be sorted en route, and dropped off without stopping, thereby cutting delivery times. The second wave of innovation was brought about by the automobile. In 1903 the German Reichspost used cars for the first time to deliver packages in the city of Cologne. Bavaria, which maintained its political independence and its own postal administration, established the first cross-country motorized line for the transportation of mail and people in June 1905. By 1914 the Bavarian postal administration was running a total of 127 lines with 155 vehicles and 136 trailers. In other German cities, battery-powered electric delivery vehicles were in service as early as 1911. The third invention which had a fundamental impact was the airplane. In 1912 the first German air mail was delivered in a demonstration show between Darmstadt and Frankfurt. Beginning in 1912, zeppelins, huge gas-filled balloons operated by the Deutsche Luftschiffahrts Aktiengesellschaft (Delag), were used regularly for both mail and passenger transportation.

World War I interrupted these developments: vehicles were needed for the war effort and gasoline supplies were limited. Regular domestic air mail lines in Germany were opened again in 1919. International air mail delivery was difficult for the Reichspost after the war because the Treaty of Versailles banned it from using former military airplanes outside Germany. However, since the Versailles Treaty also forbid Germany from building new airplanes, those planes were used to expand the domestic air mail system. After those restrictions were lifted in 1926, international air mail took off. In 1928, the German postal air mail system consisted of over 100 connections over a 33,000-kilometer network. The number of air mail letters, packages, and newspapers grew 16-fold between 1919 and 1925, and had doubled again by 1933. Because early airplanes were not able to cross the Atlantic Ocean, mail was sorted on ships at sea and when they were close enough to the American continent, airplanes took off from the ships to speed the arrival of the mail.

After World War I, various transportation enterprises competed for shares of the postal market. However, the position of the Reichspost was considered secure since its wide network insured that mail would be delivered even in difficult-to reach areas. It further expanded its capacity by purchasing private transportation businesses. An agreement was reached with its main competitor, the Reichsbahn, the German railways, which in general gave the Reichsbahn the right the long-distance traffic on highways, lines parallel to railways, and the railway replacement lines (schienenersatzverkehr), while the Reichspost was given the right to all additional cross-country traffic.

Another 1920s innovation for the Deutsche Reichspost was radio and television transmission. The first public radio show was broadcast in Germany in 1923 and the first television transmission in 1928. While other institutions were soon given the right to produce content for the new media, the Reichspost established and maintained the technical infrastructure and provided the transmission services. In 1920 the Postreklame--a business which offered advertising on postal vehicles, etc.--was integrated into the Reichspost to increase its income.

The Reichspost Under the Nazi Regime: 1933--45

The German postal system was used intensively for propaganda of Hitler's nationalist ideology after he came to power in 1933, in particular through postage stamps and radio broadcasts. The Deutsche Reichspost achieved a measure of independence under the Weimar Republic after it was taken out of the national budget but still required as a government-owned business to contribute significantly to the Weimar Republic. The Nazi government, however, reintegrated it as a ministry in 1934. Wilhelm Ohnesorge became postal minister in February 1937 and was a supporter of the Nazi regime until 1945. The post office not only paid Adolf Hitler considerable amounts of money to use his picture on numerous postal stamps, it also carried out Nazi policies by introducing special hours when Jews were allowed to use postal services, cutting them off from services such as newspaper delivery and long-distance telephone service, and not hiring them as employees. Ohnesorge illegally loaned money from the Reichspost budget to high Nazi officials and constantly monitored mail and phone messages, such as the long-distance telephone traffic between the United States and England, beginning in 1942.

In the first half of World War II, while Germany was conquering new territory, the main challenge for the Reichspost was to get close to the battle fields and deal with the increasing amount of mail and freight being delivered to increasingly distant locations. The amount of work done by the Reichspost grew by 50 percent between 1938 and 1943. At the same time, the number of Reichspost personnel lost to the army and war production rose steadily from about 50,000 in 1940 to 450,000 in the first half of 1945. Nonetheless, the number of post office employees, including those working part time, rose from 565,000 in 1940 to a high of 631,000 by July 1944. Over 6,000 postal drivers and vehicles had to actively support the SS in 1943. Towards the end of the war when the German army was in retreat, more and more civil servants from the post office were required to support the defense effort, and more and more services were cut back in the homeland. Beginning in the second half of 1944, when the "total war" was proclaimed, most of the postal services were no longer available, and a rising number of postal facilities and the necessary transportation infrastructure was destroyed as Allied troops entered Germany. At the end of the war, the German postal system collapsed completely.

Two German States and Cold Postal Wars: 1946--89

After the Third Reich was defeated, the victors formed the Allierten Kontrollrat, consisting of representatives from the United States, Great Britain, France, and the Soviet Union, to govern the country. This group ruled that the borders separating the four zones of occupation were equivalent to postal zones. The exchange of private messages was forbidden for several months, and all the mail delivered later by the new Deutsche Post and all other forms of communication was censored. The June 1948 currency reform in the three Western German zones and the establishment of two separate German states in 1949 led to two separate German postal systems: the Deutsche Post in the German Democratic Republic (East Germany--GDR) and the Deutsche Bundespost in the Federal Republic of German (West Germany--FRG).

The Deutsche Post in East Germany had a monopoly of the delivery of messages in any form--radio and television broadcasts and the distribution of newspapers and magazines. It was headed by a ministry and had a service agreement with the government-owned lottery founded in 1954. The mail distribution was neither mechanized nor very well maintained because investment funding was lacking. Thus postal employees worked under ever more difficult conditions while their pay dropped toward the lower end of the scale. The quality of service declined too as the scarcity of workers became chronic. Home delivery was abolished and mail was delivered to mailbox-complexes on sidewalks in front of buildings while packages had to be picked up at the post office. The reputation of the Deutsche Post declined even more when otherwise unemployable people had to be hired, and cases of theft subsequently increased.

The Deutsche Post was used intensively by the GDR government as a source of "hard currency." After the Berlin Wall was built in 1961, East German authorities issued more and more restrictive regulations for gift parcels from the FRG to the GDR. The number of refused and confiscated packages rose steadily. Later the Stasi, the GDR secret service, systematically scanned packages for money and other valuables, which were then removed and sold. The same department organized the sale of postage stamps to collectors in the FRG through the VEB Philatelie Wermsdorf. Among their bestsellers were stamps from the Third Reich which the GDR "inherited" in great numbers. All together income from the trade in collectible stamps was estimated at 8 to 12 million Deutschmark annually. Another source of money for the GDR was the so called "Postpauschale," a sum collected from the West German government in exchange for opening and maintaining communication channels to West Germany and West Berlin. The last Postpauschale agreement from November 15, 1983 increased the amount collected from DM 85 million to DM 200 million annually.

Because the East German government distrusted its citizens, it maintained its own telephone connections and mail delivery system. The carrier firm Zentraler Kurierdienst (ZKD), which shared space with certain post offices, delivered mail and packages between government-owned companies and authorities, and was largely used for secret messages and supplies. In the 1980s economic problems worsened; raw materials were so scarce that the print runs for magazines were rationed and the Deutsche Post, which delivered about three periodicals to every customer, refused to take new subscriptions. Specially trained civil servants at the post ministry were assigned to answer the flood of complaints. Ten percent of all Deutsche Post employees quit their jobs the year before the Berlin Wall came down.

After the founding of the FRG, the Deutsche Bundespost became the "special property" of the West German government and was required to carry out government orders. Under the Postverwaltungsgesetz, the postal law of 1953, the postal minister was simultaneously the chief executive of the Bundespost and the organization was required to transfer about ten percent of its total annual revenues--not profits&mdashø the federal budget. Ironically, the Bundespost was already in the red itself, partly because postal rates were considered politically sensitive and thus were not adjusted to match costs. As a result, the Bundespost had to take out loans to cover its operating costs as well as to make the required contributions to the federal budget. Changes were recommended by a number of expert commissions, but these were abandoned or ignored by the changing governments in Bonn.

Change did not finally occur until the early 1980s. When the FRG fell behind other countries in terms of competitiveness, primarily due to the telecommunication monopoly of the Bundespost, Christan Schwarz-Schilling, a former entrepreneur who had been postal minister since 1982, initiated postal reform. A new law, the Poststrukturgesetz, went into effect on June 8, 1989. The Bundespost was transformed into three government-owned businesses which were managed independently according to market-oriented principles: the Deutsche Bundespost Telekom for the telecommunications sector, the Deutsche Bundespost Postbank for the banking, and the Deutsche Bundespost Postdienst for the postal service. The ministry still approved short- and long-term plans and salary levels for those three enterprises.

From 1950 onward, the Deutsche Bundespost in West Germany ran advertising campaigns encouraging people to help their "brothers and sisters" in the Eastern part of the country by sending them parcels of food and other items scarce in the GDR. Bundespost employees were granted the status of civil servants, who could not be laid off. Their number rose from 260,000 in 1952 to 360,000 a decade later. In 1954 the Bundespost initiated a modernization program for the sorting of letters. The number of letter centers was cut from 3,600 to just 350 in 1970. The centralization of mail logistics was accompanied by mechanization of letter sorting which was eventually applied to parcel post sorting as well. In fall 1961, a night air mail transportation system was established, carried out by the airline Deutsche Lufthansa. At the end of the 1960s and beginning of the 1970s, the Deutsche Bundespost was the largest user of automatic data processing in the FRG, according to former executive manager Franz Schöll. However, another traditional part of the German postal system--the transportation of people--was finally abandoned. After World War II, the allied forces ruled that transportation services had to be run by local businesses; government-owned companies were no longer allowed to offer those services. The postal Kraftpost bus lines were re-established in the 1950s and in service until the early 1980s when the business was finally taken over by the new railway company Deutsche Bundesbahn.

The Postal Reunification in Germany: 1990--94

Just as the Deutsche Bundespost was about to realize far-reaching reforms, it was overwhelmed by a real revolution. On the evening of November 9, 1989, the government of the GDR--under immense political pressure--announced that citizens would be granted unrestricted rights to travel, and visas would begin being issued immediately. A few hours later, the first East Germans arrived at post offices in West Berlin to call their relatives from the other side of the Wall. Approximately four weeks later, the two postal ministers discussed cooperation between the Deutsche Bundespost and the Deutsche Post. The treaty that brought about the currency, economic, and social reunion of the two German states also reunited the two postal systems, and the two postal ministers ratified the agreement on May 17, 1990. The territory of the Deutsche Bundespost was suddenly enlarged by 44 percent, 26 percent more people had to be provided with service, the number of employees went up by 30 percent, and the number of branches grew by 68 percent.

Thereafter, the East German postal system was integrated into the Deutsche Bundespost and completely reorganized. This, however, was easier said than done. Numerous obstacles had to be overcome. For example, the Deutsche Post, like the Bundespost, had developed a four-digit system of postal codes. Many of these were codes were the same for two different cities; for example, 5300 was the code for both Bonn in West Germany and Weimar in East Germany. This problem was resolved temporarily by adding a capital letter to each postal code: O for East and W for West.

There were other challenges as well. East German post office facilities could not be taken over immediately, because of unresolved ownership issues. Then, the first appointed head of the Bundespost in East Germany was outed as a former Stasi informant. Moreover, postage fees were significantly lower in East Germany, reflecting the lower personal income in East Germany. This issue in particular created tension in Berlin post offices where employees from both parts of the city worked together but were paid different wages. West German businesses and even government-owned institutions took advantage of the lower rates in East Germany and mailed a great deal of their correspondence through East German subsidiaries, or just by dropping it off at post offices in East Germany.

After the communication borders had fallen and the West German Deutschmark had been introduced to the so-called new German Länder, the eastern part of Germany was flooded with mail, in particular advertising and catalogues from mail order businesses wanting to expand into the new market. The number of letters sent from West to East Germany rose by 300 to 500 percent between 1989 and 1990 while the amount of packages--due to mail order buying--grew five to tenfold. The East German postal infrastructure was completely unprepared for the increases. At some locations, warehouses had to be rented to accommodate the overwhelming volume of packages. Moreover, two out of three pieces of postal machinery in use at the time were completely worn out. The Bundespost helped immediately, offering 5,000 used vehicles and other desperately needed equipment. Spontaneously formed partnerships between postal workers from the East and West were followed by an exchange program where some 4,500 West German managers helped reorganize and modernize facilities in the east while East German post office employees were trained on the job in West German locations. However, it took until 1993--94 before the service quality in the Eastern post offices was equal to Western standards.

The integration of the east, along with the first Bundespost reforms, left the company with a deficit of DM 1.5 billion in 1990. At the same time, chaos of reunification hurt the quality of Bundespost service in the West as well, and the backlog of undelivered mail increased. The Bundespost started a publicity campaign in December 1991 to improve its image and stop the loss of business to private carriers. That was followed by a well-received advertising campaign worth DM 80 million publicizing the new five-digit postal codes, which were introduced on July 1, 1993. By the end of 1994, the Deutsche Bundespost Postdienst employed 342,413 people--14 percent less than it had in 1990. Between 1990 and 1994, investments totaled DM 10 billion. Although modernization had made considerable progress, personnel costs made up about 73 percent of all costs in 1994. That year, however, the company also realized a profit of DM 256.7 million out of DM 28.8 billion total revenues--its first profitable year since German reunification.

On the Way to Privatization: 1995--99

The second phase of the postal reform was the biggest privatization project in FRG history. The Deutsche Bundespost Postdienst was transformed into the Deutsche Post AG and officially registered in Bonn on January 2, 1995. Chairman of the Executive Board was Dr. Klaus Zumwinkel, a Wharton Business School graduate, former senior partner at McKinsey & Company Inc., and CEO of Quelle, Europe's biggest mail-order retailer, who had successfully led the Deutsche Bundespost since 1990. Under the new organizational structure, the executive board, which consisted of experienced managers from the private sector, made most decisions. However, Deutsche Post--like the other two Bundespost offspring--was overseen by the government holding company Bundesanstalt für Post und Telekommunikation, which was responsible for the overall payment agreements with the postal union. The holding company was supervised by the Ministry for Post and Telecommunication and supported by an advisory board comprised of 16 representatives from the federal and state parliaments which regulated the market and established rules for competition. Politicians were placed on the advisory board of Deutsche Post. The 1994 loss of DM 2.9 billion was made up by transfers from Deutsche Telekom AG, and from 1996 on the company was taxed like any other business. At the same time the markets for mail delivery and telecommunication were gradually opened to increased competition. For example, beginning in 1995 private companies were eligible to deliver mass mailings weighing over 250 grams.

In January 1998, the new postal law went into effect in Germany. It renewed the constitutional obligation to provide postal infrastructure by means of appropriate services and within an economic framework and granted Deutsche Post the exclusive right to deliver letters and addressed catalogues weighing less than 200 grams, with certain exceptions, until the end of 2002. The same year, however, 155 businesses were granted licenses to deliver certain kinds of letters under 200 grams, a move that prompted Deutsche Post to sue the government agency that had issued the licenses. One case was settled against the Deutsche Post in July 1999, as the now 170 messenger firms were offering same-day delivery, a service Deutsche Post did not offer.

In 1995 a new organizational structure was introduced, reducing the number of local offices from 385 to 172. The former 23 directorates were organized under the umbrella of five branches: Frachtpost (freight post), Briefpost (letter post), Postfilialen (post offices), Internationale Post (international mail), and Postphilatelie (postage stamps). Besides the efficient organizational structure, large-scale rationalization was at the core of the new business strategy. Deutsche Post had already invested heavily in new technologies during the first half of the 1990s to become competitive. In July 1995, the last of 33 brand-new logistic centers worth DM 4 billion for freight turnover went into service, accompanied by a new normative package format and a tracking and tracing system. In the mail delivery branch, which generated about 70 percent of all revenues, the concept "letter 2000" was inaugurated which significantly cut delivery times for letters. In 1998, 95 percent of all letters reached their destiny one day after being dropped off at a post office, in comparison to 86 percent in 1994. About DM 4 billion was invested for 83 new logistic centers for letter turnover, which replaced about 1,000 locations where letters at the beginning of the 1990s had been sorted mostly by hand.

A new concept for the country's 14,000 post offices was developed with the Deutsche Postbank AG, the former financial services arm of the Deutsche Bundespost. Bundespost had been privatized, but the German government later decided to let Deutsche Post take it over for DM 4.3 billion in January 1999. About one-third of all transactions in German post offices were Postbank transactions, and the fusion of the two companies gave Deutsche Post the opportunity to better utilize its network of post offices--the biggest and most concentrated branch network in Germany. The strategic goal of making the Postbank attractive for a public offering was to gain influence in the retail banking market. In addition, it was planned that new financial services such as construction loans, investment banking, and life insurance would be added beginning in 1999.

At the same time, new ways of offering postal services were explored. Inefficient post offices were closed, and retail businesses such as grocery stores and gas stations were allowed to offer postal services for longer hours. Moreover, 17,000 mail carriers offered a growing number of mobile services which spared people in rural areas the inconvenience of driving to the nearest post office. A shop-in-shop cooperation with the stationery retailer McPaper & Co. was so successful that the Deutsche Post acquired the company from the parent company Herlitz AG in January 1998, and to improve service quality it was regularly monitored by anonymous testers from a market research institute.

To increase its competitiveness in the market, Deutsche Post began expanding into new markets. In the domestic market, new business opportunities were explored in the fields of direct marketing, in-house postal services for big corporations, electronic transfer of letters from financial institutions which were then printed out and delivered from a post office branch close to the addressee, and online-shopping. However, the most pressing demand from existing clients was to handle mail throughout Europe and beyond, since the formation of the European Community and economic globalization. Within three years, Deutsche Post acquired major shares of ground parcel delivery companies in Austria, France, Poland, Belgium, Italy, Spain, Portugal, and the United States. The largest deal was the takeover in early 1999 of the Swiss logistics concern DANZAS with 16,000 employees and CHF 7 billion annual revenues.

Financial results for the second half of the 1990s at Deutsche Post were very promising. Although annual revenues increased only slightly from DM 27.4 billion in 1995 to DM 28.7 billion in 1998, profits rose by 450 percent from DM 282 million to DM 1.27 billion during the same period. Moreover, the percentage of personnel costs went down from 70.6 percent in 1995 to 66.2 percent in 1998, when Deutsche Post employed 233,863 people. The company planned to go public in fall 2000.

Principal Subsidiaries: Deutsche Post Express GmbH; Deutsche Post Service-und Vertriebsgesellschaft mbH; Deutsche Post Transport GmbH (75.2%); Deutsche Post Kontrakt Logistik GmbH; McPaper AG; Deutsche Post Direkt GmbH; Deutsche Post Adress GmbH (51%); Deutsche Post Consult GmbH; Deutsche Post Consult International GmbH; GMS Deutsche Post Logistik GmbH; Merkur Direktwerbegesellschaft mbh u. Co. KG (51.1%); IMS International Mail Service GmbH; Danzas (Switzerland; 99%); DHL International (Bahamas; 25%); DTZ Zadelhoff GmbH; trans-o-flex Schnell-Lieferdienst GmbH (24.8%); Belgian Parcel Distribution N.V. (98%); Ducros Services Rapides SA (France; 68.3%); Global Mail Ltd. (United States); IPP Paketbeförderung Gesellschaft m.b.H. (Austria); ITG Internationale Spedition (Germany; 80%); Qualipac AG (Switzerland); quickstep parcel service AG (Switzerland); Servisco Sp. z o.o. (Poland; 60%); Yellowstone International Corp. (United States); Van Gend & Loos (Netherlands); Selektvracht (Netherlands).