Postal Service desperately needs to change

The organization has lost $5.1 billion in the past year and can't make an annual $5.5 billion payment due Friday.

By Kim Peterson Nov 16, 2011 3:06PM
The U.S. Postal Service continues to be destroyed by FedEx (FDX), UPS (UPS) and the Internet, and its future is looking bleak.

The service said this week that it lost $5.1 billion in the past year. And that's after a prolonged cost-cutting effort that eliminated 130,000 jobs and shuttered smaller post offices.

Post continues below.
Now the biggest thorn in the USPS' side is rearing its ugly head again. The annual bill is due for the $5.5 billion needed to prefund retiree health care benefits. The service simply can't make the Nov. 18 deadline with its current finances and is hoping to get an extension from Congress.

The Postal Service has tried to drum up business with cute commercials and expanded services. But mail volume has fallen by more than 20% since 2006, The Hill reports. The service's biggest revenue contributor, first-class mail, dropped 6% in the last year alone.

The service says that without drastic changes, it will run out of cash -- or be dangerously close to that point -- by next September, Bloomberg reports. The service is classified as a self-supporting government enterprise.

So what can the USPS do at this point? Here are some options it's considering.

Restructuring. The service is talking to potential advisers about a broad restructuring, Bloomberg reports. Some of those advisers helped the U.S. Treasury department deal with General Motors (GM) and Chrysler.

More layoffs. The USPS wants to cut 220,000 more jobs by 2015.

More location closings. The service is mulling a plan to close up to 12% of its locations, or 3,700 post offices. It's also thinking about closing 252 of its 487 mail-sorting facilities, the Los Angeles Times reports.

Scrap that retiree prepayment. The service has asked Congress for permission to stop pre-funding retiree benefits.

Cancel Saturday delivery. It's too costly, the serivce says.

But most of those options would run into fierce resistance from Postal Service unions, which have been very strong historically. Nearly 80% of USPS expenses go to labor costs, including retiree benefits, Bloomberg reports. That compares with 60% for UPS and 40% for FedEx.

The service says it will survive if it can just cut annual costs by $20 billion by 2015. But without drastic action from Congress and union leaders, the USPS is doomed.

Tags: FDXgmups
82Comments
Nov 16, 2011 7:34PM
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maybe if congress paid back the forty one billon, they took over the last four years from usps they might have a chance to survive. They have robbed ss the same way. Maybe on all the money they have made on inside trading, they can fund the post office themselves.  the biggest bunch of crooks and cheats I have ever laid eyes on
Nov 16, 2011 5:14PM
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OMG how little most of you know!

1) The post office receives NO taxpayer money.

2) The post office MUST deliver to all homes in the US. That includes flying mail to remote ranches and delivering it by mule to the bottom on the grand canyon.

3) The post office is MANDATED by Congress to pre pay ALL retirement expenses for the next 75 years, yes 75 years. They have to put money away now for employees not even born yet. You read in the article about the cost cutting already done and the jobs eliminated, but the amount of retirement to be pre paid has not gone down. As a matter of fact agencies with in the government has gone on record and stated that the USPS has already over paid into the fund by up to $60 Billion. Yes, that is with a B.

4) The prices charged are mandated by the government not actual costs. Did you know that the shipping of your magazines only cover 75% of the cost ?

5) As for comparing the USPS with UPS and Fedex, did you know that the when the price of gas spiked the other two charged a gas surcharge but the USPS had to eat the cost. Did you know that the pricing of the other two are based on business practices not mandates.

6) Did you know that one of the most profitable parts of Fedex is rual delivery that the Post Office delivers to the home not Fedex?

7) Do you realize what would happen to the inconvient delivery routes if a private company took over? Can you say sorry no deliver to you?

8) With the amount of first class mail going down and homes are still being built the USPS will go by each of the new homes, meaning more vehicle and more carriers with less money coming in.

 

The solutions are not easy but the government needs not to jump in and cut too soon. The retirement payments have to change. The excess needs to be refunded. A thought out plan to downsize the post office needs to be put into place. Pricing has to change. One more did you know, did you know that mass mailers get a discount to pre sort the mail but the post office still has to sort it anyway to get it mixed with all the other mail. If the USPS were allowed to discontinue the discounts, the mass mailers would than not have to pay to have the mail sorted and the customer would still pay the same price to have there bill mailed.

 

One last thing, my computer has crashed several times in all the years I've used one, my mail box has never crashed. 

 

Nov 16, 2011 4:42PM
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The Postal Service Unions have been the most conservative and best run in any American Business. You cannot take away the union or the uneducated managers would have there way with the employees. Not a good idea. Every union has good and bad employees. Postal Employees are hard working, good people for the majority. The answer is to let your congressman know that the postal service should not have to fund their pet projects and make the deficit look good by prefunding Federal retirements.  Congress needs to stop pilfering from the postal service , which is a sound business and in good shape without government intervention.  They also need to give them back the money they have been paying in since 2006 to make Congress look better. Come on Congress,do the right thing!

Nov 16, 2011 4:30PM
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It's funny to see that so many think the Gov is funding the PO - you have that backward. Why does the PO pre-pay the retirement? This is a requirement from the Gov. They saw that the PO had extra cash and needed a way too get hold of it. I beleive the funding requirement is now up to 80 years in advance. Now the Gov can get their hands on the PO money for their own pet projects. If it wasn't for this one item the PO would actually be turning a profit.

 

Changes would still need to be made, but good luck there - the union and the Gov will stop that.

Nov 16, 2011 7:06PM
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IGNORANCE OF THE POST OFFICE IS OBVIOUS FROM MOST OF THESE POSTS

THE UNITED STATES POST OFFICE IS THE CHEAPEST MOST EFFICIENT DELIVERY

SERVICE IN THE WORLD.........IN A FREE MARKET COMPETITION WITH UPS THEY

WOULD SLAUGHTER THEM JUST FROM ECONOMIES OF SCALE

 

UPS DOESN'T COME CLOSE TO HAVING THE INFRASTRUCTURE TO DELIVER TO EVERY ADDRESS

 

Nov 16, 2011 7:10PM
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Well now... as a FEDEX/UPS supporter how do propose to deliver all their packages that they put in the USPS system because they don't go to to remote areas??
Nov 16, 2011 7:22PM
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A big money saver would be to stop handing out bonuses to worthless postmasters and stop hiring "no nothing" supts. of mails which are mostly just hatchet men for the U.S. P.O.
Nov 16, 2011 4:40PM
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for those of you that think the po is a drain on tax payers, get with the program hasn't had a penny of tax money in 30 years. come on man
Nov 16, 2011 6:47PM
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First of all, the Postal Service does not get one cent from taxpayer money and it is a self funded run organization. It is not claiming any taxpayer money. It just wants congress to pay back some of the Billions it has been pre-paying into the retirement fund. Which by the way, is the only agency that was order by congress to do so. Right now the Postal Service has pre-pay retirement for people who have not even been born. For years the Postal Service has been depositing Billions into the government. If congress release some of the overpaid Billions (approximately 60 Billions) it owe the Postal Service this is all the Postal Service needs, in addition to consolidate the network to it's current nationwide requirements which means early retirement and/or separation for many employees, pay freezes for EAS management (which by the way has already been implemented for fiscal year 2011 and 2012) and elimination of bonuses and cash awards. Oh yes! It needs congress to lift the several restrictions it has impose on the Postal Service which does not allow it to run as a competitive business.

Nov 16, 2011 6:57PM
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Ive been a postal contractor for 20years and try as you may,you cannot make changes within the post office to increase production and/or output due to a very outdated union bonus to the workers called the trade/craft! I worked at 1 of the biggest mail facilities on the east coast and you would be sickened by this rule if you were to understand it,so im gonna try to explain it! There is an inbound section where recieved mail is unloaded,and there is an outbound section where mail is sent out.So if say the outbound side has no mail to load or move,and the inbound side is screaming for help from the outbound crew,they are not allowed to do so because there position is deemed a craft,and its a bid job.So they are allowed to sit down,have coffee,and just hang out (on the clock) until the operation reumes.Fed ex and ups have been working with the po for years now,and eventually they will get the work due to privatization! The simple remedy is to eliminate the craft/trade rule and just have the workforce work in harmony to protect their jobs.And most of the workers i have met and still know do work to protect their jobs.Its not the 50's anymore and all union jobs have become whats known as a working job.If the P O continues without making this change they will privatize and all postal workers will lose their jobs plain and simple!Oh and by the way,to anybody who thinks the postal benefits for retirement are just handed to them,you're nuts,each and every worker puts a good amount of their earnings into a retirement acct.I hope I have helped somebody with my statements
Nov 16, 2011 8:16PM
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US postal service cheapest and most efficient on Earth Laws forcing it to go bankrupt.   Why are they forced to pay for pensions 75 years out.   Costs 5 billion a year for next 10 years.   The exact amount they are short.
Nov 16, 2011 4:44PM
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The Post Office is not funded by the Gov

They over pay OPM by Billions. 

Have Gov give it back they will be the the green

 

Nov 16, 2011 6:01PM
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Dar-fl1 what are you talking about,postal workers do contribute to their retirement funds just like any other worker does. Oh by the way their retirement is no way near as good as UPS workers get I know I'm a retired lettercarrier and have a uncle who retired from UPS. We both worked for 31 years and his retirement is $700 more than I get.So tired of people making comment they have no idea what their talking about.
Nov 16, 2011 5:39PM
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Ryan, I worked as a temp rural route carrier after I got laid off.  None of the regular rural route carriers I worked with made more than $35K/yr, and a few with families had 2nd jobs to make ends meet.  Did YOU ever work there and see first hand what the real story is?  Where the hell do you get your numbers?  It seems like everytime you post something, it's full of ____!
Nov 16, 2011 6:22PM
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IF THE POST OFFICE GOES OUT OF BUSINESS WATCH HOW HIGH FED EX AND UPS CHARGE FOR THEIR SERVICES. THE REASON WHY THE PO'S RETIREMENT COSTS ARE A GREATER PERCENTAGE  IS THAT THEY DON'T CHARGE OUTRAGEOUS PRICES AND GAS SURCHARGES. THERE FORE IT TAKES MORE OF THEIR OPERATING COST TO PAY THEIR EMPLOYEES AND RETIREES. THIS WRITER IS EITHER DUMB OR SLANTING THE ARTICLE. WHAT WAS THE PERCENTAGE OF PROFIT TO SHARE HOLDERS OF FED EX AND UPS, BET IT WAS VERY HIGH.
Nov 16, 2011 8:50PM
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This article is very misleading.   The reason for the Post Office's decline came when congress in 2006 made them pay the health benefits of employees 75 years into the fututre (Employees not even born yet).  So for the next ten years the Post Office must pay $5 billion annually.

 

This is the republicans attempt to destroy the Post Office and privatize it.   Look into and support HR1351 -- write all your congress people and senators!

Nov 16, 2011 4:59PM
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Destroyed by private companies that HAVE NO CONGRESSIONAL OVERSIGHT AND NO CONGRESSIONAL OBLIGATIONS TO PREFUND ANYTHING LET ALONE FOR THE NEXT 75 YEARS?!!!

You want to make the post office viable? Get stupid know-nothing Congressmorons out of the equation and allow the post office to run like a business.

The post office can't adapt if the Congressmorons keep stopping them.

But thats the plan.

Get as much money into Congressthieves coffers then fold up the post office and leave all current employee's and retiree's out in the cold to accept whatever garbage package the Congressthieves decide they should get.

After all, contracts are only valid if they are pertaining to million dollar bonuses for wall street executives.

Nov 16, 2011 4:39PM
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What do you think is going to happen to all the people in this country that don't have a computer and I know a lot of them in my area.  They do not want or cannot afford a computer or the internet costs.  All this sounds so easy but it is not.

Nov 16, 2011 4:20PM
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Might be able to be saved, if....

You take government intervention and unions out of the scene...

Nov 16, 2011 6:12PM
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the write doesnt tell the whole story. i dont know if that is by design or in efficient.

under i believe a 2006 bill required the usps to prefund their retiree benefits for the next 50 (?) years. this is a burden that not one agency has ever had to do. they also do not have the same rights as ups and federal express as to all of the services they can provide. so if congress would stop trying to destro the usps, maybe it can turn its self around.

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