Postmaster General Continues Efficiency Improvements

/PRNewswire -- Postmaster General Patrick R. Donahoe today announced a newly redesigned Postal Service, one that is better positioned for growth, reflects further alignment within the organization to achieve core business strategies and, when fully implemented, will help realize approximately $750 million of annual cost savings.

"I am confident that we have developed a strong plan that takes a key step toward a leaner and less bureaucratic structure. One that is fair to our employees and one that will meet the future needs of our customers and the mailing industry," Donahoe said.

About 7,500 positions will be eliminated across the organization through the redesign that also includes the closing of seven district offices and offers limited financial incentives to those who meet specific qualifications.

The seven district offices that are closing are Columbus, Southeast Michigan, Northern Illinois, South East New England, South Georgia, Big Sky and Albuquerque. District offices house only administrative functions and do not affect customer service, mail delivery, Post Office operations or ZIP codes. The functions of these seven districts will be assumed by district offices within close proximity.

A Voluntary Early Retirement and financial incentive programs will be offered to eligible employees. Employees must be 50 years old, with at least 20 years of service; or any age with at least 25 years of service to qualify for the incentive. Employees who accept the VER offer or already meet existing retirement qualifications will receive $20,000 paid over two fiscal years to separate from the Postal Service.

"It's critical that we adjust our workforce to match America's changing communications trends as mail volumes continue to decline," Donahoe said. "At every step and with every change, our focus remains on our customers and continuing to provide outstanding customer service."

Today's announcement focused on the administrative and executive corps. Additional staff reductions will occur as the Postal Service makes necessary changes to its network and retail operations. The full scope and financial impact of these personnel actions should be realized in one calendar year – March 2012.

While cost savings will be realized, the main objective of the restructuring is to enhance and strengthen customer service and relationships. The realignment flattens the organization, enabling flexibility to more quickly adapt to changing market forces and continuing mail volume decline.

The Postal Service is streamlining operations and improving efficiencies across the organization in order to protect its ability to provide affordable, universal mail service. By modifying networks, consolidating functions and restructuring administrative and processing operations, the Postal Service is adapting to meet the evolving needs, demands and activities of its customers.

"Mail remains valuable. It is at the heart of a $900 billion industry that continues to drive commerce and the American economy," Donahoe said. "We will continue to work with Congress and our employees to achieve the long-term, structural and legislative changes we know we need to remain a viable organization."

A self-supporting government enterprise, the U.S. Postal Service is the only delivery service that reaches every address in the nation, 150 million residences, businesses and Post Office Boxes. The Postal Service receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations. With 32,000 retail locations and the most frequently visited website in the federal government, usps.com, the Postal Service has annual revenue of more than $67 billion and delivers nearly 40 percent of the world's mail. If it were a private sector company, the U.S. Postal Service would rank 29th in the 2010 Fortune 500. Black Enterprise and Hispanic Business magazines ranked the Postal Service as a leader in workforce diversity. The Postal Service has been named the Most Trusted Government Agency six consecutive years and the sixth Most Trusted Business in the nation by the Ponemon Institute.

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Postal Service Ends Third Quarter With $3.5 Billion Loss

/PRNewswire/ -- The U.S. Postal Service ended the third quarter of fiscal year 2010 (April 1 - June 30) with a net loss of $3.5 billion, compared with a net loss of $2.4 billion for the same quarter last year. Third-quarter mail volume totaled 40.9 billion pieces - down approximately 700 million pieces, or 1.7 percent, compared to a year ago.

Complete USPS third-quarter results include operating revenue of $16 billion, some $294 million less than the same period last year, and operating expenses of $19.5 billion, an increase of $789 million, or 4.2 percent, over the third quarter last year.

The increase in operating expenses was attributable largely to higher workers' compensation expenses due to a non-cash fair value adjustment and higher retiree health benefits expenses. Lower interest rates adversely affected the workers' compensation liability, resulting in a $2 billion expense for the quarter - $870 million higher than the same quarter last year.

A significant portion of USPS losses in the past few years has been due to an unprecedented decline in mail volume - down by more than 20 percent since 2007. The replacement of letter mail and business-transactions mail by electronic alternatives continues to cause downward pressure on mail volume.

The organization's financial situation is compounded by its obligation to pay $5.4 billion to $5.8 billion annually to prefund retiree health benefits. This requirement, established in the Postal Accountability and Enhancement Act of 2006 (PAEA), is an obligation unique to the Postal Service.

Liquidity remains a major concern as the end of the fiscal year approaches. Although cash flow appears to be sufficient for 2010 operations, it is uncertain whether cash flow, together with maximum available borrowing of $3 billion, will be enough to fund the Congressionally-mandated $5.5 billion payment to the Retiree Health Benefit Fund on September 30 and retain sufficient liquidity into 2011, according to Joseph R. Corbett, the Postal Service's Chief Financial Officer.

"Given current trends, we will not be able to pay all 2011 obligations," said Corbett. "Despite ongoing aggressive cost reductions totaling over $10 billion in the last three years, it is clear that a liquidity problem is looming and must be addressed through fundamental changes requiring legislation and changes to contracts."

The Postal Service has incurred net losses in 14 of the last 16 fiscal quarters. The fiscal 2010 year-to-date net loss is $5.4 billion, compared to a loss in the same period last year of $4.7 billion.

Postmaster General John Potter noted that despite the cost-cutting, the Postal Service has continued to maintain a high level of customer service. The third-quarter service score for overnight single-piece First-Class Mail was 96.7 percent on-time, an improvement of 0.4 percent from the same period last year.

"Our dedication to customer service remains a top priority," Potter said. "We continue to provide dependable customer service even as we focus on reducing costs. With the dedicated efforts of our entire organization, we are well on track to achieve approximately $3 billion in total cost reductions in 2010," said Potter.

Cost reductions center on initiatives to improve efficiency and match work hours to reduced mail volume. Other savings are coming from consolidating excess capacity in mail processing and transportation networks, realigning carrier routes, delaying construction of new postal facilities and a variety of other initiatives.

Work hours were reduced by 63 million in the first three quarters of fiscal 2010, or 6.6 percent compared to the first three quarters of 2009. That is the equivalent of about 36,000 full-time employees.

"Securing the fiscal stability of the Postal Service will require continued efforts in all of these areas, as well as further review of retiree health benefit prefunding," said Potter. "It also will require that the Postal Service gain flexibility within the law to move toward five-day delivery, to adjust our network as needed, to develop new products the market demands, and to work with our unions to meet the challenges ahead."

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Postal Service Continues Cost-Cutting Actions

/PRNewswire/ -- In a decision to save hundreds of millions of dollars in labor-related costs, the U.S. Postal Service negotiated an agreement with two of its employee unions to offer select employees a financial incentive to retire or resign before the end of the fiscal year.

The one-time offer is a strategic move to accelerate targeted staffing reductions for employees represented by either the American Postal Workers Union (APWU) or the National Postal Mail Handlers Union (NPMHU).

Advances in mail processing technology and the continuing recession have led the Postal Service to more aggressively match work hours with work load. The majority of employees eligible for the incentive work in mail processing facilities.

Because the number of addresses grows by 1.5 million each year, letter carriers represented by the National Association of Letter Carriers and the National Rural Letter Carriers' Association were not extended this offer.

The incentive provides eligible employees $10,000 to be paid during the first three months of Fiscal Year 2010, creating salary and benefit savings for the next nine months. The same employees will receive a second payment of $5,000 in Fiscal Year 2011. Fiscal Year 2010 starts Oct. 1, 2009.

As many as 30,000 employees could take advantage of the incentive offer. Savings to the Postal Service could be as much as $500 million next year.

The employee incentive offer is the latest in a series of cost reductions the Postal Service has made this year. Cost savings during 2009 are expected to total more than $6 billion, including the following actions:

-- Cutting more than 100 million work hours, the equivalent of 57,000
positions;
-- Halting construction of new postal facilities;
-- Closing six district offices;
-- Negotiating an agreement with the National Association of Letter
Carriers that adjusts letter carrier routes to reflect diminished
volume;
-- Instituting a nationwide hiring freeze;
-- Reducing authorized staffing levels at postal headquarters and area
offices by at least 15 percent;
-- Selling unused and under-utilized postal facilities;
-- Adjusting Post Office hours to better reflect customer use;
Consolidating mail processing operations; and
-- Freezing salaries of all Postal Service officers and executives.

"This decision reflects our desire to provide a fair and equitable opportunity for some of our longest-serving employees," said Anthony Vegliante, chief human resources officer and executive vice president. "It is important to the Postal Service that we take appropriate measures to address our current financial situation."

The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.

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