US Postal Officials Want FedEx's Support Behind Reform Plan

Postal officials said Friday they hope sometime rival and current business partner FedEx Corp. will put its lobbying muscle behind a reform plan that would give the Postal Service more flexibility to change prices while retaining its monopoly over first-class mail.

Postmaster General Jack Potter also said they plan to close as many as 500 small post offices and some of their 400 distribution centers. But he promised no stamp hike in 2003 if, as expected, the Postal Board of Governors approves an increase from 34 to 37 cents starting this summer.

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Potter delivered the 450-page plan to Congress and the White House Thursday and unveiled it to the public at a National Press Club luncheon.

"It's a blueprint for modernizing every aspect of the way we do business. If we fail in that task, if we're unable to make the changes needed to compete successfully, the only post office our children's children will know are the ones they'll see in museums," said Potter.

Potter proposed legislation allowing the Postal Service more flexibility to negotiate rates with its largest mailers, re-write workplace rules, close post offices, lease space to retailers, enter into new businesses, retain earnings and in general operate more like a private corporation.

Earlier this week, he talked to Frederick W. Smith, chairman, president and chief executive officer of FedEx.

"I told him that we wanted to assure that there's a strong Postal Service for America today and into the future. And I told him I was counting on his support," said Potter.

Potter said Smith reminded him that FedEx supported a long-stalled postal reform bill authored by Rep. John McHugh (R-N.Y.). That bill gives the Postal Service more pricing flexibility for its mail monopoly, but also weakened the Postal Service's ability to compete with private sector products.

FedEx spokesman Greg Rossiter said the company hasn't had a chance to review the transformation plan. However, he said, "We support a strong U.S. Postal Service."

The Postal Service bars private companies from shipping regular mail; express companies aren't legally allowed to deliver to home and business mailboxes.

The FedEx relationship changed in January 2001 when the Postal Service awarded a $7.2 billion contract to FedEx to carry and sort express mail out of the Memphis hub as well as allowing FedEx to deploy drop boxes at post offices.

After the Sept. 11 terrorist attacks, the contract was expanded to include larger postal packages that had been going on commercial passenger jets. FedEx officials credit the contract with achieving more efficient use of their planes because the express mail is sorted and flown during the day.

Deborah Willhite, senior vice president of government relations and public policy at the Postal Service, said the transformation plan will have no impact on the FedEx contract.

She said there's not much product overlap with either FedEx or Atlanta-based United Parcel Service Inc.

"If you look at it, UPS has a monopoly in packages, FedEx has a monopoly in overnight and we have a monopoly in letters. They're just not regulated government agencies," said Willhite.

UPS spokesman David Bolger said, "We are for universal service and a strong Postal Service focusing on first-class mail."

But UPS has some "serious" questions about the plan when it comes to branching out beyond first-class mail, he said.

"That's what we are looking very closely at," said Bolger, who added that UPS would like to see the Postal Service retain its current structure.

If given more flexibility to compete with private companies, Bolger said the Postal Service would have an unfair advantage because it doesn't pay state or local taxes among other things.

"We cry foul at that," he said.

As for consolidating mail distribution centers and closing post offices, it's too soon to say where those cuts will occur, said Beth Barnett, a Postal Service spokesman.

The Postal Service has already cut 30,000 jobs nationwide and $2.5 billion in costs over the past two years. Nearly 300 jobs and more than $50 million in costs were cut in the Tennessee District area. Over the next five years, costs will be cut by $5 billion more nationwide, according to the Postal Service.

Raymond Shields, a shop steward and editor for the American Postal Workers Union Memphis local, which represents 1,900 workers, said the transformation plan "will affect us greatly."

"A lot of this transformation that they are talking about will be good for the Postal Service, not for the Postal Service employees," Shields said.

"It cuts us (postal unions) out."

–By James W. Brosnan and Richard Thompson