UPS, DHL end negotiations over $1 billion contract

Negotiations have ended between Sandy Springs-based UPS and European rival DHL over an air cargo contract valued at $1 billion.

“UPS and DHL have mutually agreed to terminate their negotiations,” confirmed UPS spokesman Norman Black. “As UPS is in its quiet period before earnings, we will have nothing further to say at this time.” UPS will release its earnings on Thursday.

Last spring, the two companies announced they would try to seal a deal to allow UPS to handle air cargo for the German post office-owned DHL.

UPS would have shipped the cargo via its air hub in Louisville, Ky. DHL would have then used its trucks to deliver packages to its customers.

The potential agreement, however, became a hot-button issue because it would have meant the closure of DHL’s air hub in Wilmington, Del. Then-presidential candidates Barack Obama and John McCain both expressed concerns about job losses in that community.

In the end, DHL will move its hub to Cincinnati, as it has substantially pulled the plug on its U.S. operations. The decision ends a multibillion-dollar bet it made on the U.S. market.

DHL expanded in the United States with door-to-door deliveries in 2003, but failed to capture significant market share from U.S. heavy weights FedEx, UPS and the U.S. Postal Service.

Last year, DHL said that the company was losing about $1 billion a year on its U.S. operations.