Last Wednesday the United States Postmaster General and Chief Executive Officer Patrick Donahoe addressed an audience of 8,000 regarding the new reality that the United States Post Office is facing. He touted cutting costs by over $12 billion and reducing staff by more than 110,000 positions over the past four years but still recognizes that he has lots of work ahead of him. It is estimated that the USPS will need to reduce its annual costs by $20 billion by 2015 to become profitable. Donahoe praised USPS employees for helping the USPS to save $12 billion and blamed the entire situation on an overly restrictive business model, not the devaluation of mail.
So what is this “overly restrictive business model”? The USPS is the only––and I mean only––organization in the world that pays out pension funds for employees who are not currently retired. Yes, you can read that again––it is correct. The union negotiated for prepayment of pensions, which guarantees that the money will be there when employees retire. The USPS agreed to these terms back when mailings were strong and profitable and has been unable to renegotiate, even with the large decline in mail over the past four to five years.
As part of its restructuring plan, the USPS has proposed that Congress pass legislation that:
- Gives the Postal Service the authority to transition to a national five-day-per-week delivery schedule
- Resolves the retiree health benefit prepayment requirement
The USPS also continues to make progress on the fronts listed below:
- Studying 252 mail-processing facilities for potential consolidation
- Reviewing 3,600 low-activity post offices for potential closure, consolidation, or contracting
- Enhancing and expanding alternate access sites, including village post offices and usps.com
- Modifying delivery routes and service standards
- Making it easier to do business with the Postal Service with new, innovative products
I can sincerely say that I hope the USPS can figure out how to manage its budget and maintain some sort of acceptable service level, but given the current situation it seems unlikely. I wouldn’t mind 5-day service, or even 3-day service. But that would only work for residential delivery; commercial delivery would need to stay at 6-day service. Over the course of the next few years, we will see what the USPS will make of itself, and speaking on behalf of the industry, I wish them the best. Just don’t raise our postage prices, or we will go to UPS and FedEx!!
Author: John Mehl