Postal Service Plans To End Saturday Mail Deliveries

Move could save the Post Office up to $2 bln a year.

The U.S. Postal Service plans to end Saturday mail delivery as soon as August to cut financial losses, a change Postmaster General Patrick Donahoe said it can make without Congress’s approval if necessary.

The service, which lost $15.9 billion last year, said it would continue six-day deliveries of packages, deliver mail to post-office boxes and keep open retail locations that now operate on Saturdays.

The change would lead to the elimination of 22,500 jobs and cost reductions of as much as $2 billion a year, Donahoe said. The job cuts can be made by attribution and buyouts, he said at a news conference in Washington.

“We need to generate nearly $20 billion in cost reductions and revenue increases to be able to close our budget gap and repay our debt,” Donahoe said at the service’s headquarters.

Lawmakers have stifled previous cost-cutting proposals, including efforts to end Saturday mail delivery.

Cutting Saturday delivery is allowed under Congress’s continuing resolution funding government operations that expires March 27, Donahoe said.

“It is our opinion with the way the law is set with the continuing resolution, we can make this change,” he said.

Representative Darrell Issa, a California Republican who leads the House Oversight and Government Reform Committee, which oversees post office operations, backed the proposal. Issa and Oklahoma Republican Senator Tom Coburn, his party’s senior member on the Senate Homeland Security and Governmental Affairs Committee, sent a letter to Congress calling the change to five-day delivery a “common-sense reform” that is “worthy of bipartisan support.”

The post office’s losses have continued to widen and are estimated at $25 million a day. Mail volume is down 26 percent from its 2006 peak. To pay bills and keep the mail moving, the postal service has had to skip $11.1 billion of required payments over the past two years for future retirees’ health costs. It exhausted its $15 billion borrowing authority last September.

The service, which has 521,000 career employees, says it will run out of money in October even after ignoring this year’s retiree health obligation. If it can’t pay workers or buy fuel for trucks, Americans looking for their bills, magazines and catalogs could find empty mailboxes.

President Barack Obama’s budget proposal for fiscal 2013, released last year, called for cutting one day of mail delivery each week.

 

‘Disastrous’ Move

Fredric Rolando, president of the National Association of Letter Carriers union, called the move “disastrous” and said Donahoe should resign or be ousted.

“If the Postmaster General is unwilling or unable to develop a smart growth strategy that serves the nearly 50 percent of business mailers that want to keep six-day service, and if he arrogantly thinks he is above the law or has the right to decide policy matters that should be left to Congress, it is time for him to step down,” Rolando said in an e-mailed statement.

Since the Postal Service plans to continue delivering packages on Saturdays, any impact on United Parcel Service Inc. or FedEx Corp. would probably be negligible, said Kevin Sterling, an analyst at BB&T Corp. in Richmond, Virginia, who recommends buying shares of both companies.

UPS and FexEx rely on the USPS for last-mile delivery of packages sent using their cheaper SurePost and SmartPost services, respectively, in which case the USPS determines the date of the final delivery already and could simply hold some of those packages until Monday.

Customers who chose those shipping options are picking the “cheapest alternative” and likely wouldn’t care if their items arrived a day or two later, Sterling said. They probably wouldn’t be willing to spend more for UPS or FedEx’s more premium ground or air services to begin with, he said.

“It’s a rounding error for UPS and FedEx, either way,” Sterling said. “They don’t want to deliver the mail, and that’s what this is about. I don’t see it having a material impact on either of them.”

About 5 percent of the service’s employees in January accepted a cost-cutting early retirement offer. The service says it has already cut about 60,000 full-time jobs in the past two years.

Donahoe, in a Jan. 3 statement, urged Congress to make postal legislation “an urgent priority.”

“We are on an unsustainable financial path,” Donahoe said. “The Postal Service should not have to do business this way.”

Competing Senate and House proposals to help resolve Postal Service finances expired when the old Congress left Jan. 3.

 

 

Bloomberg News

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