The United States Postal Service announced plans yesterday to cut its Saturday mail deliveriesfrom August to reduce its operating losses, but said it would retain six-day package deliveries in
response to the recent growth in their volumes, driven by e-commerce.The move is seen by some as a challenge to the US Congress, although postal unions condemned thedecision, with one calling for the resignation of the Postmaster General.
USPS expects the new delivery schedule, beginning during the week of 5 August, to generate costsavings of around $2 billion annually once the plan is fully implemented.
Postmaster General and CEO Patrick Donahoe said that for several years, the Postal Service hadadvocated shifting to a five-day delivery schedule for mail and packages. However, recent stronggrowth in package delivery – a 14% volume increase since 2010 – and projections of continued strongpackage growth throughout the coming decade had led to the revised approach to maintain packagedelivery six days per week.
“The Postal Service is advancing an important new approach to delivery that reflects the stronggrowth of our package business and responds to the financial realities resulting from America’schanging mailing habits,” said Donahoe. “We developed this approach by working with our customersto understand their delivery needs and by identifying creative ways to generate significant costsavings.”
But Donahoe told reporters at a news conference yesterday that the organisation could no longerhold back from reducing the frequency of mail deliveries. “We are now at a point where it isabsolutely necessary for that move,” he said. “This financial year we made a loss of $15.9 billion.By any measure that is unsustainable and it is unacceptable.”
Of the $15.9 billion loss, $11.1 billion was due to the amount that the company was obligated topay the US Treasury to pre-fund retiree health benefits. “We had to default on the payments becausewe did not have the funds,” Donahoe said.
He said the Postal Service was expected to operate like a business, but its obligations and thelegal restrictions placed upon it meant it did not have the possibility to reduce costs like aprivate business would.“ And we are at the end of our borrowing authority,” he added.
“To give some perspective about our liquidity situation, a typical large organisation would haveeither cash on hand or a quick borrowing facility for two months’ worth of cash to cover theiroperating costs. In October at one point last year, the Postal Service had less than four days ofcash on hand,” Donahoe continued.
“That is a very scary situation and it’s no situation that a business should be in. And that iswhy we are taking aggressive steps to reduce costs and why we have been so vocal in seeking postalreform legislation.”
He said the Postal Service was continuing to implement major restructuring throughout itsretail, delivery and mail processing operations, and since 2006 had reduced its annual cost base byapproximately $15 billion, reduced the size of its career workforce by 193,000 – or 28% – and hadconsolidated more than 200 mail processing locations.
“During these unprecedented initiatives, the Postal Service continued to deliver record highlevels of service to its customers. But even with these significant reductions, we still have alarge gap to fill,” he told journalists. “And so that is why we are announcing these changes.”
Given the on-going financial challenges, the Postal Service Board of Governors last month haddirected postal management to accelerate the restructuring of Postal Service operations in order tostrengthen Postal Service finances.
“The American public understands the financial challenges of the Postal Service and supportsthese steps as a responsible and reasonable approach to improving our financial situation,” saidDonahoe. “The Postal Service has a responsibility to take the steps necessary to return tolong-term financial stability and ensure the continued affordability of the US Mail.”
He said the operational plan for the new delivery schedule anticipates a combination of employeereassignment and attrition to achieve the estimated $2 billion annual cost savings. Mail deliveryto street addresses would occur from Monday to Friday, while mail addressed to PO Boxes wouldcontinue to be delivered on Saturdays. Post Offices currently open on Saturdays would remain openon Saturdays, he added.
“Our customers see strong value in the national delivery platform we provide and maintaining asix-day delivery schedule for packages is an important part of that platform,” said Donahoe. “Asconsumers increasingly use and rely on delivery services — especially due to the rise of e-commerce— we can play an increasingly vital role as a delivery provider of choice, and as a driver ofgrowth opportunities for America’s businesses.”
USPS said market research conducted by the Postal Service and independent research by major newsorganisations indicate that nearly seven out of ten Americans supported the switch to five-daydelivery as a way for the Postal Service to reduce costs in its effort to return the organisationto financial stability. It said support for this approach “will likely be even higher since thePostal Service plans to maintain six-day package delivery”.
USPS said it was making the announcement more than six months in advance of implementing thereduced mail-delivery schedule, to give residential and business customers time to plan and adjust.It plans to publish specific guidance in the near future for residential and business customersabout its new delivery schedule.
Donahoe said the announced change in the delivery schedule was one of the actions needed torestore the financial health of the Postal Service, but said legislative change was “urgentlyneeded to address matters outside the Postal Service’s control. The Postal Service continues toseek legislation to provide it with greater flexibility to control costs and generate new revenueand encourages the 113th Congress to make postal reform legislation an urgent priority.”
Some commentators praised Donahoe for his actions, describing it as “a challenge to Congress”,although consumer advocate Ralph Nader said USPS was “continuing its tradition, under theleadership of Postmaster General Patrick Donahoe, of shooting itself in the foot”. He added: “It isunclear where Postmaster General Donahoe thinks he has the authority to make this change withoutcongressional approval. In making the move to end Saturday letter delivery, Postmaster GeneralDonahoe has not only shown his complete disregard for the good of the USPS’s consumers, but he hasalso ignored the will of Congress. For decades, Congress has mandated six-day delivery.”
Postal union the National Association of Letter Carriers (NALC) called for Donahoe’s resignationand said the plan to end Saturday delivery “flouts the will of Congress” and was “a disastrous ideathat would have a profoundly negative effect on the Postal Service and on millions of customers”.
“Slowing mail service and degrading our unmatchable last-mile delivery network are not theanswers to the Postal Service’s financial problems,” said NALC President Fredric Rolando. “If thePostmaster General is unwilling or unable to develop a smart growth strategy that serves the nearly50% of business mailers that want to keep six-day service, and if he arrogantly thinks he is abovethe law or has the right to decide policy matters that should be left to Congress, it is time forhim to step down.”
He said the plan would be particularly harmful to small businesses, rural communities, theelderly, the disabled and others who depend on Saturday delivery for commerce andcommunication.
“This manoeuvre by Mr. Donahoe flouts the will of Congress, as expressed annually over the past30 years in legislation that mandates six-day delivery, which remains in effect today. In the lastCongress, which ended in January, a bi-partisan majority of Representatives co-sponsoredlegislation backing the continuation of Saturday delivery.
“This misguided and counterproductive decision is in keeping with the Postmaster General’sslash-and-shrink approach to dealing with the Postal Service’s financial challenges. Instead ofoffering a real business plan to tap the full potential of this essential American institution, heis offering a plan that will doom USPS to failure.
Rolando said NALC had “tried time and again” to work with Postal Service management to pursuegrowth measures and cost savings, “but it has become clear that the Postal Service leadership’sonly strategy is to gut the unique postal network that provides us with the world’s most affordabledelivery service, and to eliminate the services on which Americans depend.”
He continued: “America’s letter carriers condemn this reckless plan in the strongest terms. Wecall for the immediate removal of the postmaster general, who has lost the confidence of the menand women who deliver for America every day. And we urge Congress to develop a real reform planthat gives the Postal Service the freedom to grow and innovate in the digital era.”
US Senator Tom Carper, chairman of the Senate’s Homeland Security and Governmental AffairsCommittee, said he was “disappointed by the plans to transition to a five-day mail deliveryschedule in August” but he welcomed the intention to preserve Saturday package delivery. “Despitemy disappointment, it’s hard to condemn the Postmaster General for moving aggressively to do whathe believes he can and must do to keep the lights on at the Postal Service, which may be onlymonths away from insolvency,” he said. “The financial challenges that have been building at thePostal Service for years – attributable in large part to a reduced demand for hard-copy mail – areeminently solvable, yet Congress has failed at every turn to come to consensus around a set ofeffective reforms.
“At the end of last year, I participated in bipartisan, bicameral negotiations that I hopedwould lead to significant financial and operational reforms at the Postal Service. Unfortunately,we ran out of time and were unable to produce a legislative compromise that we could present to ourcolleagues before the 112th Congress adjourned,” Carper continued.
“Now that the 113th Congress is officially underway, I have made it one of my top prioritiesduring my first weeks as chairman of the Senate Committee on Homeland Security and GovernmentalAffairs to pick up last year’s postal reform negotiations where they left off so that my colleaguesand I can reach agreement on a meaningful bill as soon as possible. Piecemeal efforts like the onethe Postal Service announced today will not be enough to solve the Postal Service’s financialchallenges for the long haul.”
The American Postal Workers Union (APWU) also responded angrily to yesterday’s announcement,saying the decision to eliminate Saturday mail delivery would “only deepen the agency’scongressionally-manufactured financial crisis”.
President Cliff Guffey said: “The USPS has already begun slashing mail service by closing 13,000post offices or drastically reducing hours of operation, shutting hundreds of mail processingfacilities, and downgrading standards for mail delivery to America’s homes and businesses. Theeffects are being felt in cities and towns across the country.
“USPS executives cannot save the Postal Service by tearing it apart. These across-the-boardcutbacks will weaken the nation’s mail system and put it on a path to privatisation.
“Congress has the power to restore the USPS to financial stability. To do so, it must repealprovisions of the 2006 law that created the Postal Service’s financial crisis. The agency’s crisisis a direct result of an unsustainable congressional mandate that was imposed on the Postal Serviceby the Postal Accountability and Enhancement Act (PAEA).” This is the federal law that forces thePostal Service to pre-fund healthcare benefits for future retirees, and to do so in a 10-yearperiod.
“No other entity — public or private — bears this burden,” said Guffey. “Since the PAEA tookeffect in 2007, the Postal Service has been required to pre-pay approximately $5.5 billion peryear. Yet the same law prohibits the Postal Service from raising postage rates to cover thecost.
“The USPS has a vital mission — to bind the nation together by providing efficient, inexpensiveservice to every part of the country. The Postal Service should be seeking ways to expand itsofferings to the American people so that it can remain relevant in the digital age.”
