Will Congress Go Postal?
According to the Washington Post, the USPS has a right sizing plan that includes laying off 120,000 postal employees, closing over 3,000 post offices and not replacing approximately 100,000 jobs lost to attrition.
The writing has been on the wall for a long time. I don’t think anybody is surprised, especially after the 2010 annual report that came out last September called out all the red. Basically, all the numbers were pointed in the wrong directions.
The numbers quoted in the Washington Post speak for themselves. The USPS is on the verge of bankruptcy and something has got to change.
“During the past four years, the service lost $20 billion, including $8.5 billion in fiscal 2010. Over that period, mail volume dropped by 20 percent.”
So what is the Post Master General asking to do? Basically, what any business manager would ask to do…take drastic measures. In this case, it will literally take an act of Congress to enact some of these measures. Which puts this entire Gordian Knot, on the people up for election in 2012. It seems that the Post Master is telling congress, “something has to change, either you let me right size this business or you bail me out.” It is going to be really interesting to see whether Congress elects to bail out the postal service and how they intend to do it.
What’s the problem?
In a nutshell, revenues are going down and costs are going up.
Here is the USPS 2010 Annual report that pretty clearly lays out the big issues facing the USPS:
- Employee costs are way too high
- USPS employee pension and benefits costs are dragging it down. Labor contracts have lots of heavy clauses like “no-firing employees”.
- They have too many locations selling too few products
- The USPS isn’t responding to changes in the market quickly enough. How long have we been hearing about cutting “Saturday delivery’.
- USPS Revenues are falling short of the mark.
What should the USPS do?
Interestingly, there are a few proposals and the Washington Post is just outlining the latest put forth by the U.S. Postmaster. Expect to see a lot more proposals and bailout options presented over the next few months as this issues takes center stage (rightly), as it is a stellar example of many of the ills facing the U.S. economy in general. There will likely be a lot of grandstanding in Washington as this issue gets dumped into the laps of lawmakers.
Unfortunately for the USPS all this attention and uncertainty isn’t going to help it increase sales. The customers of companies going through complex balance sheet restructuring are ripe for being sold onto competing products by competitors. So, this slow motion restructuring is adding uncertainty to an institution that sells it reliability as a core feature. That could lead to a further loss in revenues right when it isn’t needed.
We will continue to monitor this as it continues to unfold. None of our merchants should be concerned at this point about a USPS service failure at this time. In the event that their is a USPS service failure we’ll update our blog with our actions plans well in advance.