The loss-making US postal operator USPS announced the completion of its cost-cutting studiestargeting closures or consolidation of nearly half of its mail processing facilities after it
warned that will lose up to $18 billion a year by 2015 unless urgent measures are taken.As part of its Area Mail Processing consolidation studies that started over five months ago,USPS concluded that at least 223 of its 461 mail-processing plants should be shut or merged withother locations by February 2013 with the aim to cut 35,000 staff.
“These changes are a necessary part of a larger comprehensive plan developed by the PostalService to reduce operating costs by $20 billion by 2015 and return the organisation toprofitability,” USPS stated.
In a letter to the US Congress written last week, USPS postmaster general Patrick Donahoegave details of an updated five-year cost-cutting plan put together with advisers EvercorePartners. The letter included many of the postal agency’s previous proposals, such as closing up to252 mail-processing centres and 3,700 local post offices.
USPS admitted in an official statement that it is going through a financial crisis due to thecombined effects of the economic recession, increasing use of electronic communications, and anobligation to prefund retiree health benefits.
“First-Class Mail volume has deteriorated, leading to significant revenue declines, and theobligation to prefund these retiree health benefits on an accelerated basis remains unresolved. Todate, legislative proposals to address the financial crisis remain pending, leaving the PostalService and the mailing industry it supports in an increasingly precarious position,” the companyexplained.
Since 2006, First-Class Mail volumes have rapidly declined with other mail productsgenerating considerably less revenue than they cost which is not profitable. Therefore, the excesscapacity emerging from declining mail volumes creates opportunities for consolidation, as USPSexplained its decision.
Responding to the announced closures, the president of the American Postal Workers Union(APWU), Cliff Guffey, said that it leaves the union members just one option: “We must continue thefight! That means getting Congress to act now to Save America’s Postal Service.”
In “stand-up talks” with employees yesterday, USPS managers stressed that consolidationswould not take place until after May 15, when a six-month moratorium on consolidations expires. Themoratorium was intended to give Congress “the opportunity to enact an alternate plan,” postalofficials pointed out.
Legislative action is expected next month when the Senate begins consideration of a reformplan that would permit the Postal Service to close thousands of post offices and end Saturday maildelivery.
“The Postal Service has sent a clear message,” Guffey said. “If Congress does not take actionbefore the moratorium expires, management intends to dismantle the mail processing network.”
He urged the APWU members to ask their senators and representatives to support thelegislation “that will correct the underlying cause of the USPS financial crisis without slashingservice, eliminating jobs, and destroying the network of plants and post offices that keeps themail moving.” Guffey also highlighted the rejection of consolidation of 35 reviewed facilities asgood news.
Already in September last year, USPS announced plans to downsize its operations dramaticallywith the possible closure of more than half of its mail processing facilities eliminating 35,000jobs to save up to $3 billion a year.
Earlier this month, USPS reported a net loss of $3.3 billion for the three months to 31December, and said that in the absence of significant changes in the law to allow normal commercialfreedoms, the Postal Service will default on retiree health benefits pre-payments to the federalgovernment due this year. Even if legislation changes or eliminates the pre-funding payments, USPSmay reach its $15 billion debt ceiling this autumn.
“The Postal Service continually assesses its infrastructure, network, logistics capabilitiesand mail processing operations and constantly makes changes designed to improve efficiencies bymaking better use of space, staffing, equipment and transportation to process the nation’s mail,”the company reiterated in a statement.
