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USPS posts $3.1 billion loss in Q3, warns of default


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By Emily Stephenson | Reuters

WASHINGTON (Reuters) - The U.S. Postal Service posted a net loss of $3.1 billion in its third quarter and warned again it would default on payments to the federal government if Congress did not step in.

Total mail volume for the quarter that ended June 30 fell to 39.8 billion pieces, a 2.6 percent drop from the same period a year earlier, as consumers turn to email and pay bills online.

The mail carrier, which does not get taxpayer funds, has struggled to overhaul its business as mail volumes fall. It has said personnel costs weigh heavily and is facing a massive retiree health benefit prepayment next month.

"We are experiencing a severe cash crisis and are unable to continue to maintain the aggressive prepayment schedule," Joseph Corbett, the agency's chief financial officer, said in a statement.

"Without changes in the law, the Postal Service will be unable to make the $5.5 billion mandated prepayment due in September."

Congress, which last week ended a vitriolic debate about the U.S. government's debt levels and budget deficit, is now in recess until early September.

USPS cut work hours during the quarter by 3.1 percent compared to the previous year, when quarterly net losses were $3.5 billion.

The Postal Service said it lost $5.7 billion during the nine-month period ended June 30, compared to $5.4 billion in the same period of 2010.

In its fourth straight year of declines, the agency had a net loss of $8.5 billion for the 2010 fiscal year.

Despite the overall losses, USPS said shipping and standard mail saw growth in the third quarter, with revenues up 7.3 percent and 1.7 percent respectively. Packaging services revenue rose 3.2 percent.

Postal officials have called for Congress to change the way USPS operates, saying it needs more flexibility to close failing post offices, cut Saturday delivery and raise rates.

The agency is studying about 3,700 of its 32,000 post offices, stations and branches for possible closure. Officials plan to replace post offices by contracting with private retailers to sell stamps, offer shipping and provide other postal services.

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Postal Service considers cutting 120,000 jobs

By RANDOLPH E. SCHMID - Associated Press

(AP) — The financially strapped U.S. Postal Service is considering cutting as many as 120,000 jobs.

Facing a second year of losses totaling $8 billion or more, the agency also wants to pull its workers out of the retirement and health benefits plans covering federal workers and set up its own benefit systems.

Congressional approval would be needed for either step, and both could be expected to face severe opposition from postal unions which have contracts that ban layoffs.

The post office has cut 110,000 jobs over the last four years and is currently engaged in eliminating 7,500 administrative staff. In its 2010 annual report, the agency said it had 583,908 career employees.

The loss of mail to the Internet and the decline in advertising caused by the recession have rocked the agency.

Postal officials have said they will be unable to make a $5.5 billion payment to cover future employee health care costs due Sept. 30. It is the only federal agency required to make such a payment but, because of the complex way government finances are counted, eliminating it would make the federal budget deficit appear $5.5 billion larger.

If Congress doesn't act and current losses continue, the post office will be unable to make that payment at the end of September because it will have reached its borrowing limit and simply won't have the cash to do so, the agency said earlier.

In that event, Postmaster General Patrick Donahoe said, "Our intent is to continue to deliver the mail, pay our employees and pay our suppliers."

Postal officials have sought congressional assistance repeatedly over the last few years, including requests to be allowed to end Saturday mail delivery, and several bills have been proposed, but none has been acted on.

In addition the post office recently said it is considering closing 3,653 post offices, stations and other facilities, about one-10th of its offices around the country, in an effort to save money. Offices under consideration for closing are largely rural with little traffic.

And in June the post office suspended contributions to its employees' pension fund, which it said was overfunded.

In its 2010 annual report the post office reported a loss of more than $8 billion on revenues of $67 billion and expenses of $75 billion.

And even while total mail volume fell from 202 billion items to 170 billion from 2008 to 2010 the number of places the agency has to deliver mail increased by 1.7 million as Americans built new homes, offices and businesses.

The latest cutback plans were first reported by The Washington Post, which said a notice to employees informing them of its proposals stated: "Financial crisis calls for significant actions, we will be insolvent next month due to significant declines in mail volume and retiree health benefit prefunding costs imposed by Congress."

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  • 4 weeks later...


U.S. Postal Service Nears Default


As the U.S. Postal Service begins shuttering offices across the country to stem their ever-growing $9.2 billion deficit, the entire agency now faces default and could shut down next summer, USPS spokesman Dave Partenheimer told ABCNews.com today.

"Right now we think we can make it through until next summer most likely but then some hard choices will have to be made," he said. "That's why it's such an urgent crisis."

USPS owes $5.5 billion to fund future retirees' health benefits, and next year it may not have money to pay its 560,000 employees. Partenheimer said that by Sept. 30, the end of the USPS fiscal year, the agency will have reached its borrowing limit of $15 billion.

"That's why we cannot make the payment of $5.5 billion," he said. "Something we desperately need is action from Congress to operate more like a business. That's why we're looking at other proposals to save us money."

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on Tuesday on the situation.

According to The New York Times, the USPS is considering several revenue-boosting measures including gaining the right to deliver wine and beer, placing commercial advertisements on postal trucks and in post offices, and offering more hand-delivery services.

The USPS wants Congress to restructure their health care and retirement systems, to make them independent from the federal government. In addition, the agency would move to 5-day delivery, Partenheimer said, but can't do so without Congressional action.

"That would save us $3.1 billion," he said.

In the meantime, USPS continues to cut costs.

"We've reduced costs by more than $12 billion in the last four years and cut our career workforce by 110,000 in past four years," Partenheimer said.

In July, when news about the office closures made headlines, Postmaster General Pat Donahoe told ABC News, "We do not want taxpayer money. We want to be self-sufficient."

Rep. Darrell Issa, R-Calif., the chairman of the House Oversight Committee, which oversees the Postal Service, has proposed a bill that would allow Congress to appoint a committee to take control of USPS until it's financially stable.

That bill has been referred to the Subcommittee on Federal Workforce, U.S. Postal Service, and Labor Policy.

The USPS responded to Issa's proposal saying, "We strongly oppose a provision in the bill that provides for an additional $10 billion in borrowing authority from the U.S. Treasury. The Postal Service does not need to incur additional debt."

Postal Service Profits Plummet

"Snail mail" has been on the decline for years due to email and electronic bill paying, but the USPS has yet to adapt, clinging to a traditional brick and mortar model.

A March 2010 report from the USPS highlighted a 17 percent contraction in mail volume between 2006 and 2009 due to "e-diversion, ad spend shift and the economic recession," resulting in $16 billion less revenue. The same report projected a 37 percent drop in first-class mail over the next 10 years.

In 2010 alone, the Postal Service experienced its largest one-year net loss of $8.5 billion.

A bill sponsored by Sen. Ton Carper, D-Del., chairman of the subcommittee that oversees the Postal Service, calls on the USPS to "develop a plan for the expansion of retail alternatives to post offices, such as self-service kiosks, vending machines, the Internet, Postal Service employees or contractors on delivery routes, and contract postal units."

That bill has been referred to the Committee on Homeland Security and Governmental Affairs.

In a July statement, Carper said, "The Postal Service is facing a dire fiscal crisis and two challenges -- the rapid transition to electronic communications and the lingering after effects of the Great Recession -- which threaten its very existence. In order to survive, let alone thrive in the 21st century, all options have to be considered and the Postal Service has to modernize the way it does business, including where and when it does business."

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Postal service will always run deficits hence "If it fits, it ships anywhere in the country for a low flat rate". You think they make money off that?

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Postal service will always run deficits hence "If it fits, it ships anywhere in the country for a low flat rate". You think they make money off that?

They make money off of those rates, because the prices are ridiculous for the sizes of the boxes. But, they don't get very much business because the prices are so bad.

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