The US Postal Service is urgently seeking new cost savings after being forced by Congress to dropits controversial plan to stop delivering letters on Saturdays.
The heavily loss-making postal operator, frustrated by long-running political opposition toits cost saving reform proposals, wanted to switch to weekday letter deliveries from August onwardswhile retaining parcel deliveries on Saturday. The move would have saved an estimated $2 billion ayear in operating costs and, according to a USPS survey, was supported by 80 per cent of thepopulation.
But last month the House of Representatives blocked the plan by including a legal requirementfor six-day letter delivery in a wider resolution that approved government spending this year. Thevote prompted a dispute whether USPS could legally get around this requirement.
In response, the USPS Board of Governors announced yesterday that the postal operator now hadno choice but to continue with letter deliveries on Saturday. “Although disappointed with thisCongressional action, the Board will follow the law and has directed the Postal Service to delayimplementation of its new delivery schedule until legislation is passed that provides the PostalService with the authority to implement a financially appropriate and responsible deliveryschedule,” it stated.
But the Board stressed that it continued to support the transition to a new national deliveryschedule that would generate approximately $2 billion in annual cost savings and that was “anecessary part of a larger five-year business plan to restore the Postal Service to long-termfinancial stability”.
USPS made a mammoth loss of $15.9 billion in the year ending September 2012, largely due to$11.1 billion worth of disputed pre-funding payments for retiree health benefits that it defaultedon, and a $1.3 billion loss in the October – December first quarter of the 2012-13 fiscal year.
“To restore the Postal Service to long-term financial stability, the Postal Service requiresthe flexibility to reduce costs and generate new revenues to close an ever widening budgetarygap. It is not possible for the Postal Service to meet significant cost reduction goalswithout changing its delivery schedule – any rational analysis of our current financial conditionand business options leads to this conclusion. Delaying responsible changes to the Postal Servicebusiness model only increases the potential that the Postal Service may become a burden to theAmerican taxpayer, which is avoidable,” it warned. The Board urged Congress to quickly passcomprehensive postal legislation that would allow the Postal Service to restructure its deliveryservice.
Meanwhile, USPS will start talks with unions over ways to cut staff costs and look into priceincreases. “Given these extreme circumstances and the worsening financial condition of the PostalService, the Board has directed management to seek a reopening of negotiations with the postalunions and consultations with management associations to lower total workforce costs, and to takeadministrative actions necessary to reduce costs. The Board has also asked management to evaluatefurther options to increase revenue, including an exigent rate increase to raise revenues acrosscurrent Postal Service product categories and products not currently covering their costs.”
In response, the main union representing USPS delivery workers, the National Association ofLetter Carriers, welcomed the U-turn. Its president Frederic Rolando declared: “NALC is gratifiedthat the Board of Governors has seen the light on the law — but it is time for them to reconsidertheir entire “shrink to survive” strategy. Degrading the Postal Service’s last-mile network is alosing strategy. Eliminating Saturday service, which more than a third of all business mailers wantto keep, will drive millions of customers away and do more harm than good.”
Rolando rejected further cuts in labour costs. “The Board’s call to reopen and renegotiatethe postal labour contracts is yet another sign that the Postal Service needs new executiveleadership. Asking the NALC to renegotiate a contract that was just settled in January is insultingand unnecessary. The new agreement, which reduced starting pay by 25 to 33 percent and allows formajor health care savings, provides for several labor-management task forces to work on ways toincrease revenues and cut costs,” he said.
Rolando said the Postal Service needs a growth strategy and “Congress must enactcomprehensive reform that overhauls the USPS governance structure, provides greater pricing andproduct flexibility and reduces or eliminates the crushing pre-funding burden that has caused morethan 90 per cent of this year’s financial loss so far”.
Separately, the largest postal union, the APWU, criticised the forthcoming closures of mailprocessing centres. “These closures will eliminate jobs, harm communities, and delay mail deliveryevery day — Monday, through Saturday,” said APWU president Cliff Guffey. “They will drasticallycurtail local mail sortation and will virtually eliminate overnight delivery. Service standardshave already been lowered.” He called for new postal legislation that would prevent these closures.
