Postal chief promotes service cuts to stay solvent

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Postal chief promotes service cuts to stay solvent

Faced with a loss of $25 million a day, the United States Postal Service is not ready to give up its battle to become solvent, and it plans to pursue major changes to stanch the financial bleeding, Postmaster General Patrick Donahoe said Wednesday in Atlanta.

The service has drawn fire in recent years for operating a business model critics say has outlived its usefulness and for failing to cut costs.

But Donahoe says his agency is well under way with plans to get the Postal Service back in the black by 2016.

“We find ourselves in a position where we have to — in order to make ends meet — start to reduce some of the infrastructure in the organization,” Donahoe said.

The list of challenges is virtually endless.

Just last month, the Postal Service defaulted for the first time on its annual payment for future retiree health benefits, a $5.5 billion payment deferred from the 2011 fiscal year. By the end of this month, it faces an additional payment of $5.6 billion.

The Postal Service wants Congress to change the payment schedule in a 2006 law that requires the agency to pay $5 billion a year into the fund that already has enough to pay for decades of retiree health care.

Mail volume, particularly first-class mail, is down by 21 percent over the past six years, although the decline has stablilized this year, Donahoe said.

As the agency struggles to meet its bottom line, Donahoe said some changes are occurring now in places such as metro Atlanta.

For example, Atlanta has two major mail processing facilities, one north of the city and another on the Southside.

“What we’ve been doing across the country is consolidating the work out of some of those facilities,” he said. “When you do that, with a lower volume, you’re able to absorb all the costs.”

Donahoe is also seeking to move from six- to five-day mail delivery, a step that could save more than $2 billion, he said.

He also hopes to cut about $500 million in expenses by reducing hours at about one-third of the country’s 33,000 post offices.

“These are offices that don’t have a big customer foot traffic,” he said. “In Greater Atlanta, there are about 56 of these offices that would be transitioning from eight hours a day to either two, four or six hours a day.”

As he looks forward, Donahoe said there are some encouraging signs of a turnaround. The package business has grown 10 percent over the past year, 7 percent over the year before, and first-class mail has stabilized, he said.

“We are still a $65 billion a year organization,” he said, “so we’re not something that’s going to go away in the next couple of years.”

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