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Postal Service Delivers $1.9 B Quarterly Loss

By Ed O'Keefe

The U.S. Postal Service ended its second quarter with a $1.9 billion net loss thanks to the national economic contraction and increased use of faster, cheaper alternatives to traditional mail. Despite deep cuts in costs and work hours, the service still expects a $1.5 billion cash shortfall by the end of its fiscal year in September.

“The economic recession has been tough on the mailing industry, and we have seen an unprecedented decline in mail volumes and revenue that continued to accelerate during the second quarter,” Postmaster General John Potter said during USPS Board of Governors meetings today in Washington. “We are aggressively realigning our costs to match the lower mail volumes, while also maintaining the high level of service and reliability our customers expect. We are also taking a number of steps to grow revenue.”

Those steps could prove tricky, since USPS has lost money in 10 of the last 11 fiscal quarters. Worse, mail carriers delivered only 43.8 billion pieces of mail in the second quarter, down by 7.5 billion pieces, or 14.7 percent from the the same time last year.

Second quarter revenues dropped to $16.9 billion, a $2 billion loss over last year. Operating expenses totaled $18.8 billion, a 4 percent reduction from 2008.

USPS CFO Joseph Corbett said today that the agency is aggressively trimming work hours and other costs in order to save cash. In the first half of its fiscal year, it has cut 58 million work hours -- the equivalent of cutting 33,000 full-time employees. It is on pace to trim more than 100 million work hours for the entire year, or the equivalent of 57,000 full-timers.

Potter threatened earlier this year to cut back to five days of service a week, suggesting the current six days could eventually prove unaffordable. While he called such a move a worst-case scenario, lawmakers and angry customers stepped in almost immediately, postponing further talk of possible cuts.

In lieu of service cutbacks, officials once again today expressed support for a House bill that would redirect some payments to an employee health benefits fund. The move would reduce the projected net loss this year by roughly $2 billion.

By Ed O'Keefe  | May 6, 2009; 12:30 PM ET
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USPS needs to start by trimming back the massive excess of managers they have. Many US companies did this in the 80s and 90s (like GE under Jack Welch) and the USPS needs it now. They don't deliver letters or work the counters, therefore they are overhead. They apparently need to reduce mail sorter and delivery staff, since the mail volume is decreasing. This latter part will be hard for their unions to swallow, since they're the most powerful unions in the nation, in return for not being able to legally strike. The unions will like any management reductions that happen.

I'm afraid that the Postmaster General has some fundamental misunderstandings about how his agency works if he thinks reducing mail delivery days is relevant at all - the same amount of mail has to be delivered, eliminating Saturday delivery means you need *more* people since they can't deliver 20% more each (and trust me, they can't).

Posted by: electroman | May 6, 2009 3:15 PM | Report abuse

It's wrong-headed to directly compare USPS's profits with a private business and use its profit (or not) as an all-encompassing metric of performance.

USPS has a number of restrictions--e.g. significant restrictions on rate changes, the demand for universal service, etc.--that private businesses do not face. And... that's fine and good. A reliable, affordable, and universal mail service is a public good that's worth collectively spending money on and is not something that the market would equitably provide on its own.

The push for more efficient, fiscally responsible, and high quality government services is terrific. But I think it's important that, in the process, we don't wholly conflate "profitable" with what is fundamentally good and valuable.

Posted by: jwind | May 6, 2009 3:52 PM | Report abuse

Did Postmaster General John Potter get a big BONUS AND PERKS even though the Post Office is losing big time?

Posted by: eagle55 | May 6, 2009 4:01 PM | Report abuse

Electroman, you obviously do not work or interact with the postal service. If you did, you would know that there is not an excess of managers. the postal service was cutting out management jobs for years before the latest economic situation occurred. there has been extreme consolidation in many areas. In fact the postal service has 200,000 less employees than it did 10 years ago. Just like the economic crisis we have now, the American consumer is to blame for not supporting it's own countries businesses, buying Chinese made goods and wondering why their neighbor lost his job. Everyone wants to use e-mail and electronic bill pay and buy online, then complain when they don't have service from anyone. If you think that there are cheaper alternatives to the Postal Service, please use them, I assure you................................they don't exist!!!!!!!

Posted by: brianlee | May 6, 2009 4:12 PM | Report abuse

I think it would be perfectly fine if the USPS stopped delivering on one of the mid-week days, maybe the day when the delivery volume is the lightest. I'd rather they do that then end Saturday deliveries/pick-ups or increase rates again . . . The angry customers who "stepped in immediately" over the 5-day delivery idea, I wonder if they're the same people who get angry when there's discussion of doing away with the penny.

Posted by: bucky_katt | May 6, 2009 5:46 PM | Report abuse

lawmakers and angry customers stepped in almost immediately, postponing further talk of possible cuts.
Are these people insane? Can't they wait until Monday for their junk mail? I don't get why the just don't raise the rates. For less than 50 cents I can send a letter anywhere in the country, usually in two or three days. Is anyone serious that it would be a burden if the cost was raised by 5 or 10 cents? If you send 20 letters a month (which I don't know ANYONE who does), that would be an extra dollar or two. If that is too much of a financial burden, then I say, "Deliver it yourself."

Posted by: xconservative | May 6, 2009 7:52 PM | Report abuse

I'm only buying about 1 stamp a month now. Paying bills over the internet is very convenient. There are also about 3-4 days a week when I don't get any mail, so I wouldn't miss daily deliver that much. I think the Postal Service is going to need a big taxpayer bailout soon. And then comes student loan and credit card debtors looking for their handout. Where does it stop? I guess when the country finally goes broke.

Posted by: brewstercounty | May 6, 2009 8:45 PM | Report abuse

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