It's been an ugly few years for the United States Postal Service. Lots of us have had it tough.
The quasi-government agency announced this week that it lost $3.8 billion in the most recent fiscal year, which ended September 30th. It also delivered less mail - 26 billion fewer pieces less, a nearly 13 percent drop from the previous year. The bad news follows losses totaling $7.8 billion in 2007 and 2008.
Nobody saw this coming, natch. It just snuck up on them. Nobody could figure why...
The Postal Service, as it is quick to point out, is legally prohibited from taking tax dollars. But in order to stay afloat, the agency has been actively borrowing from the U.S. Treasury: At last count, according to Postal Service spokeswoman Yvonne Yoerger, it owes the government $10.2 billion.
Which is somehow construed as not taking tax dollars. Y'gotta be really smart to understand how that is. With my mere 3-digit IQ I'da said they were, but what do I know?
Federal law dictates that the Postal Service can borrow up to $3 billion per year - but the debt cannot grow beyond $15 billion. That means that while the agency, which had revenues of $68.1 billion last year, could potentially borrow another $3 billion in 2010, it will soon no longer be able to legally borrow billions from the government.
The banks, of course, are lined up, just waiting their chance to bet their investors' money on this sure thing...
Meanwhile, the Postal Service is estimating that without significant changes, it will lose another $7.8 billion in the coming year - and deliver another 11 billion fewer pieces of mail. Which raises the question: Could the Postal Service be doomed?
If I was $10 billion in debt I'd consider myself doomed. On the other hand, Fedex and UPS don't seem to be sliding downhill. DHL has its problems, but they have to do with ineptitude -- they've got the idea what they want to do, they're just not executing it quite as well as they could. I don't know how Purolator Courier's doing -- I thought they made oil filters until I saw one of their trucks. Therefore, the Postal Service, being in the same line of work as Fedex and UPS, would seem to have a viable business line to pursue. Now, I can be hired for a small fee to have a look at their operation and tell them approximately what to do to compete with Brown and Fedex. Some off the top of my head suggestions might include
- charging more per piece of junk mail and less for actual personal mail;
- cutting stamp prices to make shipping more cost effective for consumers;
- dissolving union contracts and paying market wages;
- cutting the number of post offices (and postmasters) and augmenting with a larger number of drop-off/pickup points in shopping centers, like the two bigs do business;
- cutting upper management salaries and making bonuses performance-based
- outsourcing those drop-off/pickup points to Mom & Pop operations at fixed contract rates, rather than cost plus or something. That would result in most of them being operated by Hindus or Chinese or Ugandans, but the costs would be controllable.
"I don't think the Postal Service is in danger of going away totally," said Yoerger, the Postal Service spokeswoman. "But our current business model needs to be reviewed and revised to come up with a sustainable model so that we can get back to profitability while still continuing to meet our mission of serving all of the country with affordable, universal Postal Service."
Ijust offered to do that, and $300 an hour is a bargain price for a high-powered business consultant like me.
Yoerger told CBSNews.com that the Postal Service is seeking "flexibility to better manage our business."
"Flexibility" means you can stick your toe in your ear.
Translation: We may technically be a government agency, but we're also a business -- and we want the government to get out of the way.
They're not really that much of a business, and they continue to act like a government agency.
The agency cut $6 billion in expenses over the past year, eliminating 40,000 of its roughly 750,000 jobs and slashing overtime hours. But it says that isn't enough. And it's pushing for two major changes that it suggests could help get it back into the black in 2010.
I'm sure I could find ways to deal with them at $300 an hour...
The first is freedom from a government-mandated requirement that the agency pay more than $5 billion per year into a fund to cover its retired employees' future health benefits over a ten-year period. The government allowed the agency to forgo $4 billion of that obligation this past year, but the requirement remains on the books.
Lemme see, here... They lost $3.8 billion last year... They had an obligation to pay out $5 billion, of which they only paid out $1 billion, which means that without the obligation they'd have come up $2.8 billion short and the unionized retired postmen got shafted. If you're gonna use unionized employees, make the unions handle the pensions so that all you do is pay into the funds and the eventual collections aren't your problem. Better still, dump the unions and get your people from Kelly or Manpower or some combination of agencies and let them take care of the pensions and healthcare and such.
Problem is, Postal Service (like many industries) had a defined benefit pension plan. You work, you retire, the amount of your monthly check is fixed. Most industries switched over the last couple decades to defined contributions plans -- you work, employer tosses money into your retirement account, and after you retire your check depends on how well the fund did. Turns out that 90% of private industry pensions are now defined contribution plans, and 80% of public employee pensions are still defined benefit plans. Guess which one the postal workers have? Go on, guess.
The second goal, critics say, is a fundamental threat to the identity of the Postal Service: The end of Saturday mail delivery.
How many people are gonna notice? Who actually mails letters anymore?
Bar/bat mitzvah candidates sending out invitations and thank you notes, high school graduates sending out announcements and thank you notes, brides sending out wedding invitations, announcements and thank you notes, new mothers sending out announcements and thank you notes...
Isn't that why we now have Facebook?
| No. Just give me your checkbook and be quiet, since you clearly don't understand How Things Are To Be Done. We can serve only champagne cocktails instead of having a staffed full bar, if you need to cut costs, and go with a buffet lunch instead of a served dinner. I can even bake the desserts myself. But the invitations and thank you notes are not negotiable. |
If they lost $3.8 billion last year and cutting Saturdays, which few people would notice anyway, would save $3.5 billion then definitely cut Saturdays. For that matter, go to alternating days residential delivery and offer 7-days a week (and overnight) package delivery.
The head of the PRC, Ruth Y. Goldway, urged "caution" about cutting Saturday service in Congressional testimony earlier this month. She said such a move could undermine "the vitality of the mail system" and the justification for its mail monopoly.
The root of the matter...
"From a market perspective, the Postal Service could lose its greatest strategic advantage - ubiquity," she said. "Reducing service is detrimental to mail growth and to public perception of the value of the mail system."
Email has displaced the postal service's residential business. It's not there anymore -- all anybody gets is bills and junk mail. Unless you make serious modifications to your business model you're going to be class with the diplodocus and the woolly mammoth.
Illinois Democratic Rep. Danny Davis, a member of the Congressional subcommittee that oversees the Postal Service (and, until recently, its chairman), told CBSNews.com in an interview that the agency "is between a rock and a hard place." "It's just not generating the money that you need in order to keep operating," he said.
Not the way it's been operating, anyway...
Davis said he was open to cutting Saturday service - perhaps on a rolling basis, so that certain communities would lack Saturday delivery once or twice a month - as well as loosening the health benefit requirements. He also backed a government bailout for the embattled agency if that's what it takes to keep it afloat.
That's because there's lots of money to be spread around, and the government would be assured of getting its investment back. Why didn't I think of that? The man's obviously a genius.
"We've bailed out a lot of things,
"... with excellent results ..."
and I think the Postal Service is probably as important in one sense as some of the other places where we have put public money," he said. Added Davis: "I'm not afraid of spending public money to keep money flowing."
"I wouldn't spend my own, mind you..."
Another way to increase revenue, at least in theory, would be to raise the cost of postage, which remains exceedingly low compared to other countries. But that move is bitterly opposed by the businesses (such as catalogues and credit card companies) whose mailings now make up a major portion of what the postal service handles.
No kidding: you mean catalog and credit card companies don't want to pay more? Color me surprised. Funny thing is, I get an offer every month from my bank to take my credit card statement totally on line. And catalog companies are more and more doing everything on line. This problem solves itself if you just let it.
(In June, a Gallup poll found that two in three Americans would prefer to cut Saturday delivery if it meant keeping postal rates low.)
Actually the point's well on its way toward becoming moot. More and more people are buying fewer and fewer stamps. They don't need them anymore.
At the heart of the debate is the question of what the Postal Service means to America. Its mission is to bind the country together - to connect "every American household, business and institution through its universal service network," in the words of PRC chair Goldway, who told Congress that the agency is "literally part of the fabric of the nation."
I think of it as a precursor to the internet...
But its identity, in this technological age, has become increasingly uncertain. Most Americans today communicate not by mail but by cell phone, e-mail and instant message; the notion that the Post Office provides a vital connection to the outside world seems increasingly quaint to anyone with an Internet connection.
Thank you for that recapitulation of the obvious...
Of course, not everyone does - and the private companies that would theoretically step in if the Postal Service were to disappear would not be mandated, as the Postal Service is, to serve every address in the country.
"Hello, Fedex? Lissen, I didn't get my junk mail delivery today! Wassup widdat?"
For a small group of Americans, a mailbox is a lifeline - and the Post Office is a resource that can't easily be replaced. "We need the Postal Service," says Davis, who says the agency keeps "that link" between people "alive." How to keep if from going the way of the Pony Express, however, remains an open question.
I'll figure some answers for you for $300 an hour, six month minimum contract. Half my fee up front.
"We're like Humpty Dumpty on the wall," he said, suggesting the agency is teetering on the brink of disaster. "We haven't come up with anything that I know is actually a solution to the postal crisis."
Somewhere around here I've got an original printing copy of "How to Succeed in Business." I could loan them that, for a price.