USPS “like Greece” without comprehensive reform, says Donahoe

Postmaster General Patrick Donahoe said today that the US Postal Service could not survive with only “piecemeal” legislative reforms, such as simply correcting healthcare and pension finances. The chief executive of USPS was speaking at the PostalVision2020 Conference in Washington DC today, as his organisation awaits consideration of postal reform proposals by the US House of Representatives, scheduled for next month.

But while postal unions have been lobbying their congressmen to oppose widespread facility closures, and simply push for multi-billion dollar pension surplus rebates and a restructuring of healthcare financing, Donahoe said today that such an approach would not work.

He said a more comprehensive rethink over the cost structure of the Postal Service was needed if it was to survive in the long-term.

“If we don’t do something about the costs in this organisation, we are going to look like Greece,” he said, referring to the near-bankrupt European country.

“People say that if we just eliminate the (Retiree Health Benefit Fund) prefunding we’ll be okay. That’s wrong. Even if we have prefunding no longer there, we will still be an unsustainable business.”

Donahoe offered worst-case estimates suggesting that USPS was heading towards a $97bn annual operating cost by 2016 on a $60bn revenue, while suffering a $58.2 debt.

But he said the Postal Service’s proposed plan, with the support of Congress, would resolve the problems, albeit only returning the Postal Service to a profit level of around $1.5bn a year. USPS plans currently call for the closure of around 140 mail plants over the next nine months, and a significant reduction in hours within rural post offices.

Senate Bill support

“We’ve just lost too much First Class Mail to have six-day delivery”

Donahoe said the Postal Service would support the postal reform bill as passed by the US Senate at the end of April as a basis for getting the organisation back towards financial sustainability.

However, he insisted there was also a need for a “substantial” reduction in the size of the USPS processing network to respond to reduced mail volumes, and a move from six to five delivery days per week.

“We’ve just lost too much First Class Mail to have six-day delivery,” he said. “Moving from six to five days would immediately save $2.7bn a year, and it would not have to affect employees – we have a substantial amount of overtime at the moment that would just go away, and we have substantial numbers of employees who can retire.”

Legislation to rescue the US Postal Service, which is currently projected to make a $14bn loss this year, cannot progress until the House of Representatives has debated its version of the bill passed by the Senate in April.

The House majority leader Eric Cantor issued a memo at the end of last month scheduling the debate for the period between 5th July and the August recess.

The Republican-led House bill aims to be tougher at cutting back USPS costs than the Senate bill, and proposes an immediate end to Saturday deliveries, rather than the two-year moratorium on five-day delivery proposed by the Senate bill.

But, in its current form the House bill proposes to set up an independent commission to oversee USPS cost-cutting, an idea not favoured by USPS executives.

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