Postal Service In Desperate Need Of Flexibility, Says Chief

While addressing an audience at the National Press Club on Monday, Postmaster General and CEO Patrick Donahoe was interrupted by social activists demanding that the Postal Service not be privatized.

“Hey, hey, ho, ho, Donahoe has got to go,” demonstrators chanted in the middle of Donhoe’s speech. As they demanded that postal workers maintain their jobs and benefits, they continued to chant, “We are the 99 percent.”

“Well the good thing is they’ve definitely been paying attention to this situation,” Donahoe commented as the demonstrators were escorted out of the room by security guards. He then continued with his speech and advocated for the passage of new legislation to enable more postal service flexibility.

“While we have the mandate to operate like a business, the reality is that we don’t have the flexibility under current law to function like a business,” Donahoe remarked.

While the U.S Postal Service is a government institution, it receives no funding from the government and generates its revenue solely from the sale of postal products and services. The postal service must compete for its customers in the marketplace but cannot make decisions without government regulations.

“We’re in a deep financial crisis today because we have a business model that is tied to the past,” Donahoe related. “Most businesses make product and pricing decisions quickly based on market demand. We still have to go through a cumbersome process to price our products. Our competition can make these changes on a moment’s notice.”

“Most companies don’t pre-fund retiree health benefits,” Donahoe continued. “Not only does the postal service require to pre-fund, [but] we’re required by law to fully fund an entire 40 year obligation in 10 years.”

The Postal Service ended its 2011 fiscal year with a $5.1 billion net loss. According to Donahoe, the loss would have been around $10.6 billion if not for the passage of legislation that postponed a congressionally mandated payment of $5.5 billion to pre-fund retiree health benefits.

Currently, a pair of bipartsan Postal Service reform bills are curently awaiting votes in both the House and Senate. If the bills are passed, the Postal Service’s operations and network would be structurally remodeled, resulting in workforce, benefit and service cuts. Donahoe, however, said that neither bill contains the type of reforms he would support.

“Both bills have elements that delay tough decisions and impose greater constraints on our business model,” he said. “Taken as they are, they do not come close to enabling the cost reductions.”

Donahoe later called on Congress to pass “comprehensive legislation to provide us with a more flexible business model so we can respond better to a changing marketplace.”

USPS Plans To Reduce Work Force, Close Mail Processing Plants

By Andrea Salazar

The U.S. Postal Service will seek to reduce its workforce by up to 35,000 positions over the next 3 years and shrink its network of mail processing facilities to less than 200 by 2013, according to Postmaster General Patrick Donahoe.

Donahoe and Megan Brennan, chief operating officer and executive vice president, outlined their plans Wednesday to reduce total costs by $20 billion by 2015. 

“We have to meet this goal to return to profitability, ” Donahoe said. “What we will announce this morning helps us get part of the way there. [It] will help to create a low cost delivery platform that we need to serve our customers and to best meet the obligations to the American public.”

Brennan expects to achieve the workforce reduction through attrition, since the USPS has 150,000 employees who could retire today. Other changes will include restructuring the First-Class Mail service to a 2-3 day standard, a change motivated by a 25 percent decline in First-Class Mail usage.

Of the 487 operating mail processing facilities, Brennan said the postal service will begin reviewing an additional 252 of them for potential closure, a process she said could take up to three months. 

“It is expected that the studies will take three months from today to complete,” Brennan said. “It’s an aggressive plan, but it will put us ahead of the cost curve for the next decade.” 

Donahoe and Brennan emphasized that residential customers will not see a significant impact at the post office or in delivery as these changes are implemented.

“The postal service is still a critical part of the American economy,” Donahoe said. “We’re not going out of business. What we’re trying to do is get our finances in order so that we can stay out there in business and provide excellent service for a long, long time to come.”