Tag: North America

US Postal Service to lose USD 1 billion

Posted by | Mar 6, 2008 | |

U.S. Postmaster General John Potter told a U.S. Senate subcommittee the postal service is on line to lose USD 1 billion in 2008 due to decreasing business.

“We would never be able to dig out of that hole,” Potter told senators Wednesday.

The postal service is threatened by a drop off in first-class mail — from 98 billion pieces in 2004 to 96 billion in 2007 — and by increased pressure from states, 18 of which have introduced bills to allow residents to opt out of receiving junk mail.

“We threw out the equivalent of a grocery bag of unwanted mail each day,” Maryland Del. Karen S. Montgomery, D-Brookeville, told The Washington Post.

Montgomery introduced a “do not mail” bill in Maryland but withdrew it under pressure from lobbyists, the report said.

The U.S. Postal Service can only raise letter rates to coincide with inflation but it can raise package rates to stay abreast of competitors.

But, Potter asked senators to consider allowing the postal service to rent out space to retailers.

“Other countries … look at their assets and use those assets to generate revenue,” Potter said. “That type of flexibility is something I think we need to explore.”

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Deutsche Post to decide on future of US express ops in May

Posted by | Mar 6, 2008 | |

Deutsche Post World Net AG will present its decision on the future of its troubled US express operations in May, chief executive Frank Appel said during the German mail services company annual press conference.

Deutsche Post’s US express operations have posted unspecified losses since the company entered the market in 2004. It booked a 600 mln eur write-down of the operations during the fourth quarter.

Deutsche Post in January said it is considering several options for the troubled operations.

A pull-out is not an option, as the US market is an integral part of the group’s growth strategy, Appel said according to sheets distributed ahead of his speech.

Deutsche Post’s express division posted full-year negative EBIT of 172 mln eur after a positive EBIT of 288 mln in 2006.

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U.S. Postal Service – Declining Mail Volume

Posted by | Mar 6, 2008 | |

A fight back on Junk Mail by some 18 states in the US, as well as declining mail volumes has created a GBP 1 billion deficit for the U.S. postal service.

A decline in mail volume, particularly from domestic mail users, has seen postal operators increasingly reliant on Junk Mail but with real concerns over the quantity of paper being used that stretches the recycling capability of many towns and cities, many see the Junk Mail era as a short-lived one.

The U.S. could see more post offices located in other outlets to reduce costs, a trend already being established in the UK.

Increased competition in the U.S. is also putting pressure on the U.S. postal service. Rivals such as German-based DHL, FedEx, UPS and others are all contributing to a gradual decline in profitability and the U.S. postal service is urgently looking at ways to curb spending including reduced overtime and using more part-time workers.

Steve Lawson, editor of Hellmail.co.uk said:

“Whilst the internet age has transformed the way we all communicate and do business, it has undermined the role of postal services to such an extent that few of us actually post many letters now. The problem is a global one, not made easier by deregulated postal markets and greater competition for what were once public-sector services.”

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FedEx, UPS look to gain if DHL scales back

Posted by | Mar 6, 2008 | |

Analysts expect money-losing DHL will scale back in the United States and could make the announcement as early as today, handing FedEx Corp. and UPS a boon.

If DHL closes terminals and hubs, analysts say FedEx could get 35 percent of the lost business in the air and another 25 percent on the ground.

If the restructuring costs DHL 2 percent of revenue, FedEx stands to gain USD 45 million in business, according to a research note published Wednesday by Edward Wolfe. UPS, which has a more powerful ground network, stands to realize USD 71 million.

DHL is the fourth-largest player in the U.S. overnight package business, with revenues in the Americas for 2008 estimated at USD 2.3 billion.

With 9 percent market share, DHL trails the U.S. Postal Service, (32 percent) FedEx (31 percent) and UPS (25 percent).

DHL joined the competitive U.S. overnight business in 2003 when it purchased Airborne Freight for about USD 1 billion, rankling FedEx and UPS, which accused the monopoly Deutsche Post of investing in a U.S. carrier to fight them on their own turf.

Both pressed the issue in lawsuits, which Airborne eventually won.

Airborne was the low-cost alternative to the big players, claiming about 10 percent of the domestic air express market and 2 percent on the ground.

DHL came in promising a threat to the established carriers, but in reality has kicked little sand in their faces, mostly because it has made a series of integration and operational errors that shook customer confidence.

Analysts estimate DHL has lost USD 2.8 billion in North America, including a recent USD 748 million write-down in the United States alone, where it has also announced 600 layoffs.

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Postal Service Feels Weight Of 'Junk Mail'

Posted by | Mar 6, 2008 | |

The souring economy and changing lifestyles are dramatically affecting the U.S. Postal Service. Troubled banks are mailing fewer credit card offers. Declining new-home sales mean vacant houses sitting with empty mailboxes. And as consumers switch to paying bills online, first-class mailings are drying up.

Montgomery proposed “do not mail” legislation late last year, making Maryland one of 18 states to consider such a registry since 2007.

Soon after she filed her bill, she said she was inundated by lobbyists who represent the Postal Service and direct marketing industry. “There was so much pressure against it,” she said. “It turns out the Postal Service is relying on a lot of this junk mail.”

Montgomery withdrew her bill but says she will reintroduce it after more research and a consultation with the state’s attorney general.

Potter talked about the Postal Service’s lobbying efforts against “do not mail.”

It seems unlikely that mail volume will return to previous levels once the economy improves, thanks to shifts in the way Americans are communicating and doing business, Potter said.

To solve its immediate headaches, the Postal Service will reduce labor costs by cutting overtime and using more seasonal workers, Potter said. The service also plans to raise the cost of stamps and premium services in May, taking advantage of major reforms passed by Congress last year that clear the way for annual rate increases. The cost of a first-class stamp will rise a penny, to 42 cents, and will increase every May thereafter, officials said.

Under the reforms passed by Congress, postage for letters can increase no higher than the rate of inflation, but fees for package delivery can be raised to compete with rates charged by FedEx and other private competitors.

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