We certainly live (and market) in interesting postal times. While several announcements in the news last week provide a picture of the financial challenges still facing the Postal Service, we commend the Postmaster General for his willingness to make the hard decisions necessary to adjust the leadership structure of the organization and to streamline the system of Area and District offices around the country.
As promised, the Postal Service has announced organizational changes that, according to Postmaster General Patrick Donahoe, “will result in a leaner, less bureaucratic structure that creates greater efficiencies among managerial and administrative functions.” When fully implemented by March 2012, the changes are projected to save the Postal Service $750 million.
The plan includes:
- A 20% reduction in authorized administrative complement and Postal Career Executive Service positions – job cuts will include about 5,500 supervisors and administrative staffers plus approximately 2,000 postmasters;
- The closing of seven district offices in Columbus, OH, Troy, MI, Carol Stream, IL, Providence, RI, Macon, GA, Billings, MT, and Albuquerque, NM;
- Limited voluntary early retirement and financial incentives for employees meeting specific qualifications.
Five-day Delivery/Operations Proposal
The Postal Regulatory Commission (PRC) issued its long-anticipated “advisory opinion” on the Postal Service proposal to reduce mail delivery to five-days per week and curtail mail processing operations on weekends. The PRC’s analysis showed lower estimates of savings and higher volume losses than were projected in the USPS proposal. The PRC estimated annual net savings of $1.7 billion, compared to the $3.1 billion projected by the Postal Service.
Even more concerning than the lower cost savings projected by the PRC, was its finding that the planned changes would cause 25% of First-Class Mail to be delayed by two days. While the PRC did not directly address delays for Standard Mail, we remain concerned that delays in First-Class Mail delivery may cause delays in Standard Mail delivery as well.
The commission did not provide a recommendation on whether the Postal Service should be allowed to adopt the five-day proposal. In response to the PRC report, PMG Donahoe commented, “We remain convinced of [the value of the five-day proposal]. As such, we will also continue to press our case with the Congress on this matter.”
The Postal Service reported a net loss in February of $1.1 billion, bringing its year-to-date losses to $1.9 billion. The primary driver of the losses continues to be the Congressionally mandated prefunding of its Retiree Health Benefit Fund. Without this prefunding, the Postal Service would have shown a smaller $230 million loss in February, and an $18 million profit year-to-date.
Standard Mail remains strong, with volume up 5.9% and revenue up 4.7% year-to-date.
Chairman Darrell Issa (R-CA) has announced that the House Oversight and Government Reform Committee will hold a hearing on April 5 to review the tentative agreement reached between the Postal Service and the American Postal Workers Union (APWU). Rep. Issa has expressed concerns that while the new agreement provides the Postal Service some additional workforce flexibility, it also includes a 3.5% wage increase for current union members over the life of the contract, starting with a 1% increase in November 2012. Rep. Issa said the hearing will “establish an important baseline for Congress’s upcoming work on the Postal Service’s structure, fiscal health and self-governance.”
New Deputy Postmaster General
The Postal Service has announced the appointment of Ronald A. Stroman as Deputy Postmaster General (DPMG). Most recently Stroman served as staff director, Committee on Oversight and Government Reform at the U.S. House of Representatives. As DPMG, Stroman will play the lead role in continuing to work with Congress to address the Postal Service’s financial challenges. We wish him success with his new responsibilities.
As you can see, the USPS is considering changes that will have a significant impact on direct marketers. Stay tuned for future Speaking Direct articles as we keep you current on the state of the postal service and the impact of proposed legislation on direct mail.
- Kurt Ruppel
Marketing Services Manager