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Default, Insolvency, Shutdown . . . Oh, My!

Kurt Ruppel

If you have been reading the national media over the past month, the impression is that the U.S. Postal Service will be shutting its doors and closing up shop any day now. The USPS financial situation is undeniably dire. It lost $8.6 billion through the first 11 months of FY2011 and is predicting a loss of $10 billion for the year. But the Postal Service is not shutting down.

If your work involves direct mail, here is some information that will help you answer the questions you’re likely being asked, or at least help put your mind at ease:

Why won’t the USPS shut down?
The Postal Service is essential to the U.S. economy. The mailing industry generates more than $1.1 trillion in sales revenue and supports more than 8.5 million jobs – or more than 7% of the nation’s GDP and more than 6% of the nation’s jobs. Despite recent drops in mail volume, Postal Service forecasts show it will still be delivering more than 150 billion pieces of mail per year in 2020.

What is the USPS doing now to deal with this situation?
The Postal Service will maintain its focus on delivering the mail and providing service for its customers, while prioritizing how financial obligations are met. Megan Brennan, USPS EVP & COO, has promised “no disruptions to service or reliability.”

The Postal Service has already taken steps to reduce costs and conserve cash. In fact, it is working on a number of proposals to cut costs and balance the size of its retail and processing networks with current volume trends. These proposals include:

  • Reclaiming pension overpayments totaling more than $80 billion.
  • Establishing a more sensible pre-payment schedule for retiree health benefits, that are already in excess of $42 billion.
  • Providing the Postal Service with the authority to determine delivery frequency.
  • Providing alternative retail access to postal services.
  • Optimizing the mail processing network.

The Postal Service has also recently put forward two more aggressive plans:

  • One proposal calls for removing USPS employees from Federal health-benefit and pension programs and establishing less costly programs managed directly by the Postal Service.
  • The second proposal aims to reduce the postal workforce to 425,000 (from the current 645,000) by 2015. The Postal Service has asked Congress for authority to achieve this.

What is Congress doing? Will something happen this year?
Many of the proposals put forth by the Postal Service will require support or approval from Congress. Both House and Senate committees have held frequent postal oversight hearings to gain a better understanding of the situation, and a wide range of postal reform bills have been introduced in both chambers.

Reaching an agreement between the two parties’ approaches to providing long-term stabilization of postal finances will be difficult at best. However, given the scope of the challenge and its potential to impact the larger Federal budget, Congress can’t afford not to act.

The most likely outcome is an interim measure providing the Postal Service some financial breathing room, probably until early 2013.

Where does the Postal Service go from here?
The Postal Service will continue to manage cash and push retail and processing network right-sizing. It will also look for ways to incent staff reductions through attrition, but most importantly, it will continue mail processing and delivery operations, maintaining service to its customers.

What can we do?
IWCO Direct urges our customers and industry partners to continue to explain to their Congressional representatives the importance of the Postal Service to their business, asking Congress to recognize the seriousness of this situation, and to provide the Postal Service with the tools to ensure a stable financial future.

These are certainly interesting times for the Postal Service, and information changes on nearly a daily basis. We’ll do our best to keep you informed and help you make sense of these changes in upcoming SpeakingDirect posts. Stay tuned!

– Kurt Ruppel
Marketing Services Manager

 

link https://www.iwco.com/blog/2011/10/05/default-insolvency-shutdown-oh-my/
Kurt Ruppel

Author

Kurt Ruppel

Director Postal Policy and Marketing Communications who educates clients on postal regulations and rates, helps ensure mail packages meet spec, and develops postal strategies that achieve in-home delivery targets at the best possible postage rates. Bringing the “all of us know more than any of us” business philosophy to IWCO Direct for more than 30 years (oy!). Three-time IWCO Direct President’s Award winner, Chairman of the EMA Board of Directors, graduate of Utah State University, bicycling enthusiast, and Ohio State Buckeye Football fan.

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