Postal Service To Shut Plants

Closing processing centers will result in annual savings of $2.1 bln.

The U.S. Postal Service, after backing off plans to close rural post offices, will stick with its proposal to shut mail-processing centers, eliminating 5 percent of its workforce and saving $2.1 billion annually.

The service, after a loss of $3.2 billion in the quarter ended March 31 and predicting it will temporarily run out of cash in October, intends to close about 140 plants in the next year and about 90 in 2014, Chief Operating Officer Megan Brennan told reporters today on a conference call. A first phase will save $1.2 billion a year, she said.

The service has forecast a $9.1 billion loss for the fiscal year ending Sept. 30 and had said it might shut as many as 223 of its 461 processing plants to consolidate operations in fewer places as mail volume declines. Lawmakers including U.S. Senator Bernie Sanders, a Vermont independent who caucuses with Democrats, have asked the service to keep the plants open, including one that employs 250 people in his state.

“It would severely degrade service to the American people,” said Sally Davidow, a spokeswoman for the American Postal Workers Union. “It also would disregard requests by numerous members of Congress that the USPS extend the moratorium on plant and post office closures until postal reform is enacted.”

The service agreed last week to cut hours at its smallest post offices rather than pursue closings amid congressional pressure to retain the facilities. Postmaster General Patrick Donahoe is urging the U.S. House to consider legislation that would relieve the service of some financial obligations.

“We need to be very efficient in the way that we run our network if we’re ever going to return to financial viability,” Donahoe said on the conference call.

The closings will eliminate 28,000 jobs through attrition, Brennan said. About 158,000 workers are eligible for retirement, the Postal Service inspector general’s office said in a report this month.

A mail customers group praised the announcement as the service moving toward cutting costs.

“Some may disagree with the specific decisions that were made but all should agree that the Postal Service must shrink to match its current and foreseeable volume of mail,” said Art Sackler, coordinator of the Coalition for a 21st Century Postal Service, whose members include Bank of America Corp. and FedEx Corp.


Closings Suspension

The closings will be suspended from September through December for the U.S. November elections and the peak year-end holiday mailing period, the service said in a memorandum faxed yesterday to postal unions.

“We have less revenue to cover the cost of the infrastructure as well as excess capacity throughout the network,” Brennan said.

To close plants, the service needs to relax its internal mail-delivery standards that require it to deliver some first-class mail overnight.

As the service attempts to cut $20 billion in annual operating costs by 2015, the U.S. General Services Administration instructed government agencies this month to reduce their mail spending.

The GSA, in a May 2 memo to executive branch agencies that became effective immediately, told them to reduce hard-copy mailings between agencies, to pre-sort mail by ZIP code and consolidate mailings to get postage discounts. The GSA also said to save money by using flat-rate boxes and envelopes provided by the Postal Service.


Bloomberg News


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