The Wall Street Journal-20080216-Deutsche Post CEO-s Exit May Hasten Change at Firm

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Deutsche Post CEO's Exit May Hasten Change at Firm

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The exit of Deutsche Post AG Chief Executive Klaus Zumwinkel could speed up other changes at the German company, which finds itself at a strategic crossroads after an aggressive expansion drive.

The global mail, logistics and banking giant said Friday that Mr. Zumwinkel will resign, one day after German prosecutors said they were investigating him for tax evasion. A new chief executive could be named as early as Monday.

A spokesman for German prosecutors said the probe of Mr. Zumwinkel is one of several hundred tax-evasion cases linked to funds invested in Liechtenstein trusts. Allegations against other business figures could trigger more fallout in Germany, where a public debate already is raging over wealthy executives.

The departure of the 64-year-old Mr. Zumwinkel represents a reversal in fortunes for one of the country's most powerful and prominent executives. He hasn't responded publicly to the allegations, and the company declined to make him available to comment.

In addition to running the day-to-day operations of Deutsche Post since 1990, Mr. Zumwinkel sits on the nonexecutive supervisory boards of four large German publicly listed companies. One of them, Deutsche Telekom AG, said late Friday that Mr. Zumwinkel will resign as its supervisory board chairman. He is also a member of the board of Morgan Stanley, which didn't respond to requests to comment.

He transformed Deutsche Post from a unprofitable, state-owned domestic letter monopoly into a profitable, publicly listed conglomerate active in about 200 countries. But the share price has barely risen since the company's initial public offering in 2000 and investors have criticized Mr. Zumwinkel for focusing too much on pricey acquisitions at the expense of profit margins.

People close to Deutsche Post say Mr. Zumwinkel's likely successor is Frank Appel, a 46-year-old management board member who oversees the logistics and international mail businesses. They cautioned the situation remained fluid. John Allan, the 59-year-old chief financial officer, also has been mentioned as a possible successor. The company declined to make the executives available to comment.

The next chief executive faces major decisions. Foremost is figuring out what to do with the company's DHL express package business in the U.S., where it has lost billions of dollars since trying to make big inroads earlier this decade. The company announced last month it was undergoing a strategic review of the U.S. business and hasn't ruled out any scenarios short of a complete withdrawal.

Mr. Zumwinkel also signaled recently the company could sell its controlling stake in Deutsche Postbank AG, Germany's largest retail bank measured by customers. Several potential bidders already have voiced their interest in Postbank, which has a market capitalization of about 10 billion euros ($14.6 billion). Deutsche Post also could have Postbank form a partnership with a rival bank instead of selling it completely.

Investors are betting the next CEO will move more quickly to restructure the company. Mr. Zumwinkel wasn't expected to retire until his contract expired in November and might have been more reluctant to unwind his earlier decisions. The tax-evasion probe now also makes it highly unlikely the longtime executive will be elected chairman of Deutsche Post's supervisory board.

The company's shares gained 1.1% Friday to 22.50 euros in Frankfurt trading.

Mr. Allan would represent the most radical change at the top. The British executive joined Deutsche Post two years ago after the company he headed, logistics heavyweight Exel, was acquired by its German rival. Since being named chief financial officer last autumn, Mr. Allan has enjoyed a reputation as an aggressive cost-cutter and is popular with investors.

But Mr. Appel, who joined Deutsche Post in 2000, is a protege of Mr. Zumwinkel and has been groomed for several years to succeed him. The German-born Mr. Appel enjoys the support of local labor representatives, a powerful constituency that controls half of the company's 20 supervisory seats. He also has allies in the German government, which holds a 31% stake in Deutsche Post through a state- development bank.

Analysts say the former McKinsey & Co. partner also has shown he can be an effective cost-cutter, despite his ties to Deutsche Post's old guard. "I think both are top-line and bottom-line people," said Markus Hesse, an analyst at the German bank Sal. Oppenheim, of Messrs. Appel and Allan.

German prosecutors said they suspect Mr. Zumwinkel invested in a Liechtenstein trust to avoid paying around 1 million euros in taxes. Mr. Zumwinkel was detained Thursday for questioning and released that day but remains a suspect.

Friday, Liechtenstein's LGT Group said client data stolen from a subsidiary trust in 2002 appeared to have been unlawfully disclosed. LGT is Liechtenstein's largest banking group and owned by the principality's royal family. A spokesman for Liechtenstein prosecutors said German prosecutors appear to be following leads uncovered in the data.

The allegations of tax-dodging have sparked a public outcry in Germany. "The moral damage is considerable," German Finance Minister Peer Steinbruck told reporters.

Separately, Deutsche Postbank on Friday posted a 39% drop in fourth- quarter net profit, but said it escaped the worst of the subprime fallout.

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Nicolas Parasie and Ulrike Dauer contributed to this article.