Donahoe Lays Out the Future of the USPS

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post-office-fleetPost Master General and CEO Patrick Donahoe of the U.S. Postal Service painted a grim picture during his State of the USPS presentation to attendees at the American Catalog Mailers Association’s  2013 National Catalog Forum on May 8.

According to Donahoe, in 2003 the USPS delivered 51 billion pieces of mail, this year they deliver 21 billion pieces.

“It’s almost a $14 billion loss,” said Donahoe.  “We have lost that much volume, when you are in the catch up mode like we are you never get ahead unless you put a business plan through.”

According to Donahoe, with the loss of money, either infrastructure goes or employees are forced to take lower wages and mailers are paying higher prices.

“We don’t want to do that,” Donahoe said.

The USPS, he said, is $15 billion in debt with another $16 billion in deferred payments for health benefits, so they are looking at over $30 billion dollars in debt.

Expenses exceed revenue and the gap is growing. The bottom-line is with pre-funding and once pre-funding ends there is a substantial gap the postal service needs to fill, according to Donahoe.

“The labor costs represent 78% of postal service costs, we’ll probably never get under 70%,” said Donahoe.

Plans are in place however to address the issues in front of the postal service. Plans begin with addressing health care, network consolidations and the postal service has eliminated 21 thousand delivery routes.

usps-delivery-truck-300There are essential elements in restoring the financial stability of the USPS. These elements include cost reform, revenue opportunities, general flexibility, and oversight, according to Donahoe’s presentation.

Within cost reform the plans include worker compensation reforms, reducing overhead relating to retail, delivery routes and Mail Processing Facilities.  Revenue opportunities include preventing rate increases, enabling wide innovation and new product development; demand mailers who require six day service pay six day cost.

General flexibility and oversight includes allowing management to outsource or contract out anytime it provides cost advantages, reduce or professionalize redundant oversight, according to the presentation.

Some key legislative goals to regain self-sufficiency, includes adjusting the delivery frequency with six-day package delivery and five-day mail delivery.  Other goals include requiring a USPS health care plan with a defined contribution system for future postal service employees and reform workers compensation, streamline a governance model, authority to expand products and services.

Donahoe said five-day delivery will save the postal service $2 billion. Growth initiatives include enhancing mail, package growth and digital products.

“We think that we probably can get profitable very quickly and pay the debt amount, we have made a dramatic change in the base force that works for us, we will continue to message the unions that we need more affordability and flexibility,” said Donahoe.

In April, the USPS delayed its implementation of five-day delivery schedule until legislation is passed that provides the USPS with the authority to implement a financially appropriate and responsible delivery schedule.

According to Donahoe, if legislation doesn’t pass, the postal service will have to do something to get revenue in the organization.

“We have not given up on mail at all, we know there is growth and we have not given up on packages,” said Donahoe.

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