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Postal Service Urged to Weigh Three-Days-a-Week Mail (Update1)
March 04, 2010, 4:18 PM ESTBy Angela Greiling Keane
March 4 (Bloomberg) -- The U.S. Postal Service, facing a $238 billion budget deficit by 2020, should consider cutting delivery to as few as three days a week as the agency attempts to pare costs, a consulting firm said.
Those cuts are among changes McKinsey & Co. presented in a report this week at a postal conference in Washington. Options also included expanding business lines and restructuring retiree health benefits.
The Postal Service, projecting mail volume will drop 15 percent in the next decade as consumers switch to electronic communications, is pressing Congress to change a law requiring delivery six days a week and limiting post-office closings. A request by the service to trim delivery by one day, to five days a week, has met resistance from lawmakers.
“Action in any one area will not be enough to close this gap,” McKinsey, which was one of three consulting companies the Postal Service commissioned to review its future, said in the March 2 report.
Making changes allowed under current law, such as reducing its workforce through attrition and expanding commercial- shipping contracts and other products and services, would still leave the Washington-based Postal Service with a cumulative loss of $115 billion by 2020, McKinsey said.
“Lifestyles and ways of doing business have changed dramatically in the last 40 years, but some of the laws that govern the Postal Service have not,” Postmaster General John Potter said in a March 2 statement. “These laws need to be modernized to reflect today’s economic and business challenges and the dramatic impact the Internet has had on American life.”
Retail Locations
The Postal Service has 36,500 retail locations, more than twice as many as McDonald’s Corp. and more than triple the number of Starbucks Corp. outlets, New York-based McKinsey said.
“The Postal Service urgently needs a more flexible business model to best meet America’s changing mailing needs and consumer patterns,” said Sue Brennan, a Postal Service spokeswoman. “The volume of mail that funds the organization is declining at such a rate that we need to be able to adapt, and without flexibility we cannot.”
Asked about the possibility of trimming service to three days, Brennan said that the agency is “only focusing on five- day delivery.” Potter requested the consultants “investigate all possible options. And one of the options was to decrease mail delivery in some areas to three days due to lack of mail volume,” Brennan said.
The service said in January it’s reviewing 162 post offices, stations and branches for possible closing, down from an earlier review last year of 3,600 locations. The agency isn’t considering closing facilities in places such as small towns that are served by only one retail location.
‘System Would Collapse’
“We believe three-day delivery would result in the demise of the Postal Service,” Sally Davidow, a spokeswoman for the American Postal Workers Union, said in an e-mail. “The USPS would become irrelevant, and the nation’s government-sponsored mail system would collapse.”
The Postal Service expects to lose about $7 billion in the fiscal year ending Sept. 30, with debt expanding to $13.2 billion, approaching its $15 billion debt limit, Chief Financial Officer Joseph Corbett told reporters last month.
Privatizing the Postal Service, as countries including Germany and the Netherlands have done, is an “unlikely” option for the U.S. because it wouldn’t be attractive to investors, McKinsey said.
The Postal Service said in a statement today that it will offer “sale” prices to some customers July 1 to Sept. 30, the second such program in a year. The service will give 30 percent rebates on standard-mail letters and flats to those participants who ship at least 5 percent more than their mail volume in the same period last year.
--Editors: Joe Richter, Steve Walsh
To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net
To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net
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