Subscribe to our free, weekly email newsletter!


USPS posts $8.5 billion fiscal year loss

By Jeff Berman, Group News Editor
November 12, 2010

The United States Postal Service (USPS) reported that it had a net loss of $8.5 billion for the fiscal year which ended on September 30.

USPS officials cited various factors for the loss, including “continuing economic pressures and migration to electronic media [having] a significant adverse impact on mail volumes and operating revenues. Despite rigorous initiatives that eliminated 75 million work hours and drove productivity to record highs in 2010, the losses mounted.”

First-Class mail volume for the fiscal year was down 6.6 percent in FY 2010, preceded by 8.6 percent and 4.8 percent declines in 2009 and 2008, respectively. And the USPS said that Standard Mail showed some improvement but was flat year-over-year.

Due largely to an ongoing diversion to electronic alternatives, including e-mailing business documents and online purchasing orders, as well as other electronic mailing processes, the USPS has been under difficult circumstances for more than three years. It has seen mail volume drop by more than 25.6 billion pieces—or 12.7 percent—in the last fiscal year, with total volume currently at 177 billion pieces.

And in October, the USPS said it is planning to appeal the Sept. 30 ruling of the Postal Regulatory Commission denying the Postal Service exigent price request, which the PRC said “failed to justify rate increases in excess of its statutory CPI price cap.”

This proposal was part of the USPS’s exigent price case to raise rates filed on July 6. This case was comprised of four-to-six percent price increases for various products, including its 18 Market Dominant products.

These changes, had they been approved by the PRC, would have taken effect on January 2, 2011. When the USPS made this proposal, it said these price changes would generate $2.3 billion for the last three quarters of Fiscal Year 2011 and an estimated $3 billion for the full 12 months of Fiscal Year 2012.

The USPS also recently announced that Postmaster General and CEO John E. Potter will retire on December 3.

Potter, a 32-year USPS veteran will be replaced by Patrick R. Donahoe, Deputy Postmaster General and Chief Operating Officer. Donahoe was voted as Potter’s successor by The Governors of the Postal Service and will become the 73rd Postmaster General.

The USPS also is working to restructure retiree health benefits for as many as 800,000 retirees, even though it only has an active work force of 596,000 career employees. Left uncorrected, that bill will reach $4 billion next year.

PRC officials said that the USPS may not be able to continue to meet a statutory 10-year payment schedule at an average of about $5.5 billion per year to create a fund to pay future retiree health benefit premiums. They added that the USPS has been unable to fund this obligation from operations and has used all of its retained earnings and drawn down from its $15 billion borrowing authority. And even with the requested increase, the USPS would not be able to meet this annual obligation in 2011 or subsequent years, said the PRC.

USPS officials have stated that due to this situation it is running the risk of insolvency, coupled with a massive drop in mail volume and the fact that the bulk of its costs are fixed by laws, contracts, or regulations. And Stephen M. Kearney, USPS senior vice president, Customer Relations, said during a media conference call earlier this year that the USPS’ operating flexibility is severely limited right now.

“Our network is expanding by a million delivery points every year, and we are subject to a lot of legal requirements that limit our ability to reduce service commensurate with the decline in demand,” he said.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Before you invest in a costly upgrade to your existing WMS, consider all of your options. With many solution providers to choose from, it's important to examine all features and functions as you look for a cost effective solution that meets your needs now and into the future. With the 2015 WMS RFP template you'll be able to view all prospective vendors through the same lens, so that you can make a truly informed decision.

Mexico's growing importance in the continental supply chain is now being recognized by North American transportation groups

Satish Jindel, president of Pittsburgh-based SJ Consulting, says that one way for LTL carriers to improve both their bottom lines and overall productivity is to get a better grasp on the cost of handling a shipment and the pricing they have for it.

Falling 5.5 cents to $2.668 per gallon, this follows last week’s 5.9 cent decline for the lowest weekly average price going back to the week of October 14, 2009, when it was at $2.60 per gallon.

With the latest round of Trans-Pacific Partnership (TPP) negotiations in Maui, Hawaii ending without a deal, U.S. supply managers may be adjusting to other global sourcing strategies.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA