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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: Well, we love talking shipping and logistics. After all, understanding

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Speaker 2: who's shipping where and how much they're shipping is key

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Speaker 2: to understanding trade and the global economy. Our next guest

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Speaker 2: has a great read into that. Greg Hewitt is CEO

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Speaker 2: at DHL Express US. It's a segment of Deutsche Post

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Speaker 2: DHL Group, one of the biggest private employers in the world.

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Speaker 2: They've got more than a five hundred and fifty thousand employees,

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Speaker 2: revenues more than eighty seven billion dollars just last year.

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Speaker 2: Greg's here in the Bloomberg Interactive Brokers studio.

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Speaker 1: So great to have you here. We do, Tim and

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Speaker 1: I love talking to anybody and everybody who's involved in

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Speaker 1: transportation because it does feel like you guys do have

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Speaker 1: some great insight into what's going on in the economy. Welcome, Welcome,

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Speaker 1: Nice to have you here.

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Speaker 3: Thank you so much for the invite, My pleasure to

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Speaker 3: be here.

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Speaker 1: So tell us a little bit about the environment, what

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Speaker 1: you're seeing and the level of activity and how it

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Speaker 1: compares from the last six months from twelve months. I mean,

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Speaker 1: I'm not quite sure with the pandemic still, if we're

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Speaker 1: still thinking about pre pandemic levels. But what do you

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Speaker 1: see I.

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Speaker 3: Think I've seen To start the year, we felt it

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Speaker 3: was going to maybe be a little bit stronger, a

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Speaker 3: little bit more growth. We're coming off of post pandemic,

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Speaker 3: a bit of a downturn. What we saw was e

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Speaker 3: commerce was kind of fueling any growth that traditional segments automotive,

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Speaker 3: engineering and manufacturing, high tech. We're still a little bit lower,

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Speaker 3: maybe having last year a little bit too much inventory,

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Speaker 3: trying to cycle that out. We went into the year

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Speaker 3: with optimism thinking we closed last year stronger, maybe it

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Speaker 3: was going to grow. Haven't quite seen that in the

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Speaker 3: first quarter, seeing it a little bit softer than we thought.

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Speaker 3: But everybody's optimistic. A lot of people are talking about

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Speaker 3: peak season this year, which in aerin Ocean will come

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Speaker 3: in the summer. For me and express, it'll come kind

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Speaker 3: of us Thanksgiving to end of year. People are optimistic

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Speaker 3: that volume will grow and things are recovering.

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Speaker 2: Okay, you mentioned Aaron Ocean, so I wanted to start

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Speaker 2: with Ocean. Are you seeing any increase or is DHL

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Speaker 2: seeing any increase in demand from the ships that are

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Speaker 2: avoiding the Suez Canal? How's that playing out?

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Speaker 3: For you, I think a little less than I thought,

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Speaker 3: quite honestly, my segment. Usually when there are pinch points

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Speaker 3: in any one of the sectors, like in the ocean transport,

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Speaker 3: maybe people move things over to a fixed network clerk

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Speaker 3: ours and express. I haven't really seen that lift yet.

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Speaker 3: I think companies are still being patient. They still have

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Speaker 3: time before the peak to allow things to work themselves through,

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Speaker 3: or we'll probably see it would be more towards the summer,

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Speaker 3: or for me, a fall season if there continues to

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Speaker 3: be challenges with the supply chain, that's when things start

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Speaker 3: to convert over to air and we'd see a lift

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Speaker 3: in cargo. Great.

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Speaker 1: What's the most challenging part of your business right now?

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Speaker 1: I means certainly something we talk about as higher energy

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Speaker 1: prices right and we've pulled back a little bit off

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Speaker 1: of kind of the activity over the weekend in the

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Speaker 1: Middle East. But I am curious if that's starting to

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Speaker 1: bite into some of your costs or raise that cost equation.

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Speaker 3: From my perspective, still, my biggest challenge is dealing with

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Speaker 3: the inflationary pressures that go with rising wage rates here

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Speaker 3: in the US and the need to compensate my team

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Speaker 3: to who are skilled workers to keep the front lines happy.

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Speaker 3: That's probably still my biggest versus anything globally that's putting.

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Speaker 2: Pressure on that's interesting to hear. Where where is that

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Speaker 2: pinch point? The biggest is that with people in warehouses,

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Speaker 2: people actually doing the driving, doing the deliveries. So you're

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Speaker 2: talking you're not talking back off as folks.

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Speaker 3: No, it would be more frontline finding the skilled labor

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Speaker 3: for couriers and termost terminal handling stuff.

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Speaker 2: I mean, who's your competition there is it is Amazon

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Speaker 2: around the country that's just driving up wages.

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Speaker 3: I don't know if I would say that it's anybody

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Speaker 3: that's driving it up. I think in general you've heard

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Speaker 3: coming through the pandemic, every wage is whether it was

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Speaker 3: at a dunkin donuts to well a caurier, everything goes up.

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Speaker 2: We talk about California's minimum wage all the time, up

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Speaker 2: to twenty dollars an hour at this and we have.

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Speaker 3: To respond to that and make sure that anywhere where

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Speaker 3: we're employing people, not only are we at the minimum wage,

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Speaker 3: but generally because it's skilled labor, we've got to be

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Speaker 3: a bit above that.

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Speaker 1: Well, one thing, you know, and this is something we

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Speaker 1: talk about when we focus a lot on generally here

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Speaker 1: in the United States, and we're having a conversation earlier

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Speaker 1: with one of our analysts who watches the rate environment,

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Speaker 1: and it's kind of debate about whether or not this

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Speaker 1: idea of the FED getting back to two percent inflation,

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Speaker 1: whether it makes sense anymore, because there does seem like

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Speaker 1: the workforce that there's just not enough workers that people need,

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Speaker 1: and that maybe a higher wage is something not just

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Speaker 1: short term or until the next wage cycle, but something

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Speaker 1: longer built into kind of our economic model. Do you

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Speaker 1: agree with that or what's your thinking about wages longer term?

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Speaker 3: I think from my standpoint, what I'm not seeing is

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Speaker 3: wages don't go down once they go up, they tend

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Speaker 3: to hold and grow from that. What we've seen is

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Speaker 3: lower levels of turnover. So we've got stability in the

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Speaker 3: workforce that have gone with the higher wages. So I

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Speaker 3: think that's a good thing. Now we've got to drive

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Speaker 3: productivity in order to make sure that we've got this

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Speaker 3: shareholder return.

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Speaker 2: So Carol, this was Carol's idea. She's like, we got

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Speaker 2: to talk to Rynds here, and I'm thinking to myself, Okay.

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Speaker 1: Well make it more productive I'm thinking to.

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Speaker 2: Myself, Okay, well, if the folks on the front lines

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Speaker 2: are the ones who are driving up wages, I'm wondering

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Speaker 2: how dhl's experimenting with drones drone delivery, and if that

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Speaker 2: is actually something that's realistic in terms of supplanting or

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Speaker 2: replacing at any point certain humans who are doing the delivering.

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Speaker 3: From my perspective, it hasn't. It's not going to supplant

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Speaker 3: humans doing the delivery. In fact, we used I don't

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Speaker 3: see it. I think the reality is there there are

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Speaker 3: challenges around having autonomous vehicles in the air and airspace.

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Speaker 3: We have used it in some remote locations to deliver

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Speaker 3: medicine and such. I think we're still going to need

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Speaker 3: people delivering packages, but with the advantage of automation in

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Speaker 3: terms of software that helps with rooting, helps make sure

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Speaker 3: they can be efficient and effective. Those are the things

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Speaker 3: that I see in the near term as more of

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Speaker 3: an impact.

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Speaker 1: I got to say, and forgive me, I'm going to

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Speaker 1: talk about the competition, but ups one of the things

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Speaker 1: after spending this is a few years back, but spending

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Speaker 1: a day with a delivery man, I mean they that's exactly.

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Speaker 1: It's all technology and this whole idea of a kidd

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Speaker 1: with these You know, with our team, you don't make

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Speaker 1: left turn to make right turns because you don't want

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Speaker 1: a truck or driver spending seconds minutes at an intersection.

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Speaker 1: So things like this do add up.

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Speaker 3: They absolutely do. And so our biggest investments in technology

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Speaker 3: in the last few years would be around routing software

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Speaker 3: and station optimization. And now with international and optimization would

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Speaker 3: be what's the optimal amount of courier, roots and personnel

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Speaker 3: that you'd have in a station based on big data,

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Speaker 3: the data that tells you what's coming in you, how

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Speaker 3: do you allocate that most effectively and put into that.

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Speaker 3: With global trade clearance, customs clearance, that's probably the next

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Speaker 3: area we're investing evily in because we need to do

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Speaker 3: that more efficiently, more effectively, more streamlined.

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Speaker 1: Well, can I ask you what happens there? Is? It

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Speaker 1: just takes long.

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Speaker 3: If you add to do. If you have to clear

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Speaker 3: something formally, you've got an entry writer who has to

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Speaker 3: go through the harmonized tax codes making sure all of

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Speaker 3: the information is available for customs to clear it effectively

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Speaker 3: and for the duties and taxes to be assigned. It

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Speaker 3: can be a bit of a manual process, so doing

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Speaker 3: things with automation that makes it more accurate, more efficient,

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Speaker 3: more effective as part of our customs clearance experience.

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Speaker 2: How's air capacity? Looking at the company right now? Do

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Speaker 2: you have too much air capacity?

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Speaker 3: I wouldn't say we have too much. I think we

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Speaker 3: probably adjusted coming out of COVID, where we had a

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Speaker 3: lot of charters and extra capacity that balanced out our

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Speaker 3: fixed network. The jets that we've bought, we've now right

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Speaker 3: sized those. We try to run eighty to ninety percent

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Speaker 3: capacity utilization and then scale accordingly, and we're running a

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Speaker 3: good levels.

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Speaker 2: Well to what extent are you leaning more on third

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Speaker 2: party capacity providers right now?

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Speaker 3: I think if I would have said before the pandemic

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Speaker 3: we were very balanced between our own network and leveraging

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Speaker 3: commercial lift. Through the pandemic, we leaned much heavier on

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Speaker 3: our own network. Now we're probably balancing it out. Before

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Speaker 3: we add maybe another jet into our own fleet, we

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Speaker 3: will look at commercial to balance it out.

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Speaker 1: So still I want greg. It sounded like there was

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Speaker 1: hope that things get a little bit better this year.

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Speaker 1: Do any of your clients talking about slow down recession?

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Speaker 3: Not really? In fact, I would say, compared to this

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Speaker 3: time last year where there was a lot of uneasiness

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Speaker 3: where inventory levels were high, and there was a lot

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Speaker 3: of uncertainty this year. When I talked to them, they

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Speaker 3: are optimistic. What I haven't seen is the orders flow

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Speaker 3: through and the moves go through yet.

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Speaker 1: But people are feeling show me the order we want.

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Speaker 3: To see them. But it gives me optimism that for

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Speaker 3: peak season we'll see a return to more of the

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Speaker 3: norm we're usually in third and fourth quarter. There's a

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Speaker 3: rise in goods moving that we haven't seen in the

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Speaker 3: last couple of years.

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Speaker 2: To the same extent, why do vote, why would a

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Speaker 2: customer go with DHL instead of going with FedEx or UPS.

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Speaker 3: Well, for me, our DNA and ARE what we were

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Speaker 3: born out of in nineteen sixty nine is international and

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Speaker 3: our specialty is around the movement of goods internationally. So

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Speaker 3: if you're a small business or a business bringing goods

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Speaker 3: in from around the world, nobody can clear it and

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Speaker 3: deliver it like we do. If you're a business that

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Speaker 3: looks to market your goods globally, nobody knows those countries

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Speaker 3: and consumers better than us.

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Speaker 1: Greg twenty seconds left here because you do see kind

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Speaker 1: of the trade. If you will going between the US

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Speaker 1: and globally. Any pushback that you see in terms of

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Speaker 1: the globalization idea that we keep hearing in narratives, just quickly.

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Speaker 3: Yeah, we definitely have heard concern a little more protectionist

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Speaker 3: policy in a number of places.

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Speaker 1: See the day.

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Speaker 3: I haven't seen in the day to day. What I

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Speaker 3: have seen is probably the US China relationship. Definitely China

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Speaker 3: plus one, new markets in Asia and Mexico growing because

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Speaker 3: of that.

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Speaker 1: Yeah, we hear that a lot.

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Speaker 2: We love talking shipping and logistics.

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Speaker 1: Told you we really like it. Greg here At, chief

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Speaker 1: executive officer US of DHL Express here in studio, Greg,

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Speaker 1: thank you. This is Bloomberg