USPS Postmaster General and CEO, Patrick Donahoe, expressed fears that the US postal operatormight end like Greece if the government does not approve its restructuring plan in order to cut
costs and save the loss-making company.Speaking at the PostalVision 2020 conference in Washington yesterday, Donahoe said during akeynote speech: “If we don’t do something about the costs in this organisation, we are going tolook like Greece,” comparing USPS with the near-bankrupt country.
He stressed that it was not enough to simply eliminate the annual payments for future retireehealth benefits and that comprehensive cost-cutting measures were necessary.
During the first quarter of 2012, the postal operator generated losses of $3.2 billion andDonahoe highlighted a debt worth $92 billion to be expected by 2016 if the government doesn’t passan appropriate restructuring plan and annual expenses to rise to $81 billion. He calculated thatUSPS debt-to-income ratio would be 1.5 to one by 2016 without the necessary cost-cutting measures,similar to Greece’s debt-to-gross domestic product ratio of 1.6 to one, according to internationalmedia reports.
Last month, USPS submitted a modified plan to consolidate its network of 461 mail-processinglocations, with almost half set to close in two phases over the next three years while alsorevealing plans to loosen the next-day delivery obligations of its First-Class Mail service.
Under the company’s proposed profitability plan, the first phase of the restructuring wouldresult in up to 140 post-office “consolidations” by February 2013, with “a second and final phase”of 89 consolidations currently scheduled to begin in February 2014. In February this year, thePostal Service announced it had approved 233 facilities for consolidation. The first phase ofconsolidation activities would reduce the size of the Postal Service workforce by approximately13,000 employees and, when fully implemented, would generate cost reductions of approximately $1.2billion (€944 million) annually.
Donahoe claimed this plan would, if supported by the Congress, bring the loss-making companyback to profitability with a profit level of around $1.5 billion a year.
In response to a heavy decline in mail volumes, the company’s postal network would need to bereduced, including switching from six-day to five-day, Donahoe stressed adding that USPS would backthe Postal Reform Act approved by the US Senate in April which the company first objected to. Thebill was not well received by the House of Representatives expecting to vote on a different billlater this summer which would then have to be realigned with the Senate version.
“We’ve just lost too much First Class Mail to have six-day delivery,” Donahoe said. “Moving fromsix to five days would immediately save $2.7billion a year, and it would not have to affectemployees – we have a substantial amount of overtime at the moment that would just go away, and wehave substantial numbers of employees who can retire.”
Running from 12-13 June, PostalVision 2020 explores themes of postal platforms and answers keyquestions about the future of USPS.
