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US Post Office Service Loses $2.4 Billion

A press release from the US Postal Service:

Postal Service Ends Third Quarter With $2.4 Billion Loss

Year-End Cash Shortfall Likely Despite $6 Billion in Cost Reductions; Customer Service Scores Remain High in Face of Economic Challenges

WASHINGTON, Aug. 5 /PRNewswire-USNewswire/ — The U.S. Postal Service ended its third quarter (April 1 – June 30) with a net loss of $2.4 billion, including a non-cash adjustment that increased workers’ compensation expense by $807 million. Ongoing electronic diversion and the widespread economic recession continued to reduce mail volume, resulting in a $1.6 billion decrease in revenue for the quarter.

Despite cost reductions against the fiscal 2009 plan of more than $6 billion and actions to grow revenue, the Postal Service (USPS) projects a net loss of more than $7 billion at fiscal year-end. 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, is an obligation that no other government agency has to pay.

The Postal Service has incurred net losses in 11 of the last 12 fiscal quarters. The fiscal 2009 year-to-date net loss is $4.7 billion, compared to a loss in the same period last year of $1.1 billion, in spite of comprehensive, organization-wide cost reduction initiatives. The organization is working to mitigate a possible Sept. 30 cash shortfall of up to $700 million.

Postmaster General John Potter noted that the Postal Service has maintained a high level of customer service while facing continuing economic challenges. Third quarter service scores for overnight single-piece First-Class Mail remained at 96 percent on-time, while the score for two-day, single-piece First-Class Mail improved 1 percentage point to 94 percent.

"Our commitment to customer service is paramount," Potter said. "We will continue to provide the dependable service our customers need. We also will keep a balance with our critical focus on reducing costs so that service is not diminished.

"Thanks to extraordinary efforts across the entire organization, we are well on track to achieve our 2009 target of more than $6 billion in total cost reductions," said Potter. "In the third quarter, we surpassed the targeted amount by $500 million."

Cost reductions center on initiatives to match work hours to reduced mail volume. Other savings are coming from consolidating excess capacity in mail processing and transportation networks, realigning carrier routes, halting construction of new postal facilities, freezing Postal Service officer and executive salaries at 2008 pay levels, reducing travel budgets and similar measures. Of note is an effort launched this year to reduce the cost of more than 500 existing contracts that will result in short- and long-term savings for the Postal Service in the areas of price, scope and process improvements.

"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."

Work hours were reduced by 88 million hours in the first three quarters of fiscal 2009, or 8.4 percent compared to the first three quarters of 2008. "We are on pace to meet our goal of reducing work hours by more than 100 million for the entire year," said Joe Corbett, chief financial officer and executive vice president. "That’s double the rate of last year’s successful work-hour reductions and the equivalent of 57,000 full-time employees, or 8.6 percent of our full-time workforce."

A significant portion of USPS losses are due to an unprecedented decline in mail volume, which has fallen by nearly 20 billion pieces in 2009 compared to the first three quarters of last year. Third quarter mail volume totaled 41.6 billion pieces, down 7 billion pieces, or 14.3 percent, compared to a year ago — the largest consecutive three-quarter drop in total volume since 1971. The trend of letter mail and business transactions being replaced with electronic alternatives will also cause continued downward pressure on mail volume into coming years.

Third quarter results also show an increase in workers’ compensation expense, which increased $722 million or 198 percent compared to the same period last year. The increase reflects a non-cash adjustment of $807 million to the carrying value of the Postal Service’s workers’ compensation liability, due to a change in discount rates caused by the current low interest rate environment.

Complete USPS third-quarter results include operating revenue of $16.3 billion, a decrease of nearly $1.6 billion, or 9 percent, from the same period last year, and operating expenses of $18.7 billion, a reduction of $294 million, or 1.5 percent, from the third quarter of last year. Details are contained in the Postal Service Form 10-Q report, available at http://www.usps.com/financials/ (click Form 10-Q under Quarter Reports).

An independent federal agency, the U.S. Postal Service is the only delivery service that reaches every address in the nation, 149 million residences, businesses and Post Office Boxes, six days a week. It has 34,000 retail locations and relies on the sale of postage, products and services, not tax dollars, to pay for operating expenses. Named the Most Trusted Government Agency five consecutive years by the Ponemon Institute, the Postal Service has annual revenue of $75 billion and delivers nearly half the world’s mail.

For the record, note how seldom the word ‘union’ is mentioned.

It’s mentioned once:

"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."

Lest we forget, the United States Postal Service used to be the envy of the world.

Much like our health system is now.

This article was posted by Steve on Wednesday, August 5th, 2009. Comments are currently closed.

7 Responses to “US Post Office Service Loses $2.4 Billion”

  1. GetBackJack says:

    And Mr. Gilbert is 100% correct.

    One word.


    Got a friend who works a bulk facility. She works the midnight to 8 shift. It is hellish. The union gang bosses do nothing, and I mean nothing. One drinks most of the night and the other sleeps at his desk or eats. Both are immensely overweight. Her co-workers are as weird as Darwin’s Waiting Room. This past election they made sure EVERYBODY knew how to vote. As a woman she’s often afraid for her safety.

    And then there’s the issue of why do postal workers go postal?

    One word.


    Byzantine rules, Byzantine culture, Byzantine labyrinths of how to move up the ladder and union bosses with their hands out.


    But she won’t quit because the nearly $30 an hour she makes can’t be compared to other local jobs.


  2. proreason says:

    It’ not just the union, it’s also the hiring practices. The PO has more than it’s fair share of the something-for-nothing crowd.

    Which could be ok, if they were paid what they are worth.

    • TwilightZoned says:

      “The PO has more than it’s fair share of the something-for-nothing crowd. ”

      Absolutely true. While the PO gives preference to military and the like I’ve often thought of it as just another welfare program. I heard, not sure if it’s true, that at one point UPS was going to take over the postal system. But the deal was off when it was recognized there would be massive lay-offs.

  3. U NO HOO says:

    Don’t blame me for the losses, I quit in 2007.

    There wasn’t a flourescent tube on site to replace a burned out tube.

    I don’t know what they waste money on. (Sarcasm intended.)

    Monopolies can fail.

  4. Anonymoose says:

    I’d like to know what they use to determine the “scores” for on-time delivery, I’ve worked in too many places where performance goals were all but meaningless because of how people play the system.

    If they’re anything like my local post office they’re slow as all get out, one time I remember a postman having the person riding with him tying his shoe. It’s a far cry from the old days when you knew your postman and he was part of the neighborhood. My postman in the 80’s knew our family, our current office has one good guy who comes around every once in awhile, the others are worthless.

    The post office keeps it’s toehold for three reasons: one is they’re subsidized so heavily they can afford to have people making deliveries to every house every day. The second is they control all the rural route addresses–commercial delivery companies literally have to guess these, and lastly is the commercial delivery services don’t offer a flat rate for letters.

    Get around that and the postal service would be gone overnight.

  5. jrmcdonald says:

    I work for the Postal Service. Let me tell you the good and the bad.

    1. We are the nation’s #1 employment source for disabled veterns and a large employer of handicapped people. (good)

    2. Unions and management keep many people that should be fired. (Bad)

    3. In the event of a national epidemic, we will deliver the medicine. (Good)

    4. We ship mail from non-profits and the Government at a loss. Congress decides this, not us. (Bad)

    5. We are much more secure than most any internet transaction. (Good)

    6. We have some silly mismanagement – In face of our losses, the Postal Service just bought many new Chevy and Ford Hybrids. Vehicles which when prorated for cost and actual savings, will not show a cost reduction until about !80K miles, which is when the battery is shot… (Good intentions, bad fiscal choice.)

  6. canary says:

    This is all propaganda postal managers. Ever since they heard about the bailouts, they started their threats of doom and cutting of service.

    McDonald “We ship mail from non-profits and the Government at a loss. Congress decides this, not us. (Bad)”

    your right and this is more pressure to get that bail-out they’ve been demanding. That stupid John McHugh and Maine republcan senators, pushing for it. Less getting their free mail to patrons is another form of the PO’s threat.
    D.C. needs their mail. lol.

    The managers and union top scum, were all happy after Bush’s postal reform. During Bush, Congress did nothing but find a corrupt financial system, with no transparancy, the books so cooked they’d never figure out their financial status.
    Managers with no education, don’t like their capped salaries and have tried to privatize the post office for decades, so they can get more money for sitting at a desk.
    The mailmen carriers top pay is about 22 dollars an hour. They are the ones who get shot at, robbed, deliver non-stop during Katrina, tornadoes, ice-storms. Work with candles during electric outages. After the anthrax, they worked in tents for monthes. Their union scum leaders signed off they’d deliver in contanimated such as by anthrax areas, such as if like the muslim mexican warning of 4 lbs of anthrax coming across the border.
    One of the units I served in was warfare chemicals, so I read alot about the anthrax, and the PO had no regard for their workers. Just wiped out any type sterile field to keep it from spreading. The dogs got antibiotics before the postal workers did. The postal mgrs heard that bleach would kill anthrax, and had workers bleaching down the offices sickening employees. Made it impossible to figure the trail of the anthrax. Then later when they bleach treated the Congress’s Hart building, the blocked of blocks to protect the public, and put a huge
    hose into the building to fumigate it with bleach. Think even then, they never reopened the Hart building.

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