The U.S. Postal Service is pursuing an aggressive goal to eliminate or consolidate more than 250 processing facilities, which could cost 35,000 employees their jobs, as part of a bid to reduce $20 billion in costs by 2015.
They also announced changes in delivery standards, adding at least one day to the first class mail schedule. Reducing processing facilities and increasing delivery times would save the agency as much as $3 billion by 2013. Officials said the 1 to 3 day window for first class mail should be eliminated because mail volume has dropped 25 percent in the past 5 years and single piece First Class Mail (letters with postage stamps) has declined 36 percent. The USPS forecasts another 8 to 9 percent decline by the end of this year.
Megan Brennan, CEO and Executive Vice President of the USPS, said these steps will “put us ahead of the cost curve for the rest of the decade.” The USPS will continue conducting studies of closing the mail processing centers over the next three months to determine the feasibility of consolidations including the financial impact, Brennan said. At the earliest, closures would begin in March of 2012. The more than 250 processing facilities -- around 30 million square-feet of space-- may be sold as commercial space to private investors.
The dramatic closings and cost cutting are the agency's latest attempts to remain solvent. The agency faces as much as a $10 billion deficit this year, its second consecutive year hemorrhaging greater than $8 billion. Reduced mail volume, resulting from the growing use of email and a weak economy with fewer mailed advertisements, add to the agency's deficit. But Postmaster General Patrick Donahoe is optimistic and said the “USPS is not going out of business”.
Officials are also seeking approval from Congress in the form of long-term legislation that would restructure its generous healthcare benefits to make it independent of federal programs and eliminate Saturday delivery. Donahoe recently testified before Congress outlining the urgent situation and urged them to take action on their requests.
The Obama Administration granted the USPS a 90-day extension on a $5.5 billion payment to pre-fund retiree health benefits that was due September 30. Despite the bitter partisanship on Capitol Hill, Donahoe said he was encouraged that Congress and the Administration will act quickly and produce a bill by the end of the year that addresses their bold proposals. The White House is expected to release specific details on a financial rescue plan next week as part of a broader $1.5 trillion deficit reduction package, Donahoe said.
Since 2006, the USPS closed 186 facilities, removed more than 1,500 pieces of mail processing equipment, decreased employee complement by more than 110,000 through attrition and reduced costs by $12 billion, Donahue said.
As USPS officials review their realignment plans, they didn’t rule out the possibility of raising stamp prices next year. One first class letter stamp is $0.44.
The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations. Donahoe made clear that the USPS was not looking for tax funding or a bailout. “We are interested in fixing our own issues,” he said.