Excerpts of Postmaster General John Potter’s testimony to House Subcommittee examining the US Postal service.
As the nation’s economy stabilizes, our business will stabilize along with it. But stability, by itself, cannot be our goal. A stability based on today’s conditions simply means that we have halted the slide. Success demands more than that. It requires that we create an environment that allows us to move forward from a position of financial security when economic conditions do improve, prepared to grow, prepared to make up lost ground, prepared to pay down our debt, and prepared to meet the renewed needs of our customers. I am confident that we can do that.
Assuming that we achieve our planned $5.9 billion in savings, the Postal Service is still projecting a loss of $6 billion in 2010. This follows last year’s loss of $2.8 billion, and, in 2007, a loss of $5.1 billion. Mail volume is expected to plunge to only 180 billion pieces by the time we close our books on 2009 at the end of September. Declines are possible beyond that point. Looking ahead, and considering projections for the overall economy, we do not expect any near-term improvement. We anticipate continued volume decline and a loss of more than $6 billion for next year, based on the latest forecasts from Global Insight.
The Postal Service is taking strong and focused actions to remove $5.9 billion from our cost base in 2009. Our plans call for reducing an additional $3.8 billion in 2010. These actions follow reductions of more than $2 billion from our base costs in 2008, and over $1 billion each year beginning in 2002.
Despite the scale of these reductions, they are simply not suffiCient to close the expanding gap between a declining revenue base and the costs of financing a network that was designed to deliver mail to America’s 150 million families and businesses six days each week. Even in an extremely soft housing market, our delivery network must continue to expand to reach more than a million new addresses each year, adding to our fixed costs as revenue continues to decline. By taking the right actions now, we can make it possible for the Postal Service to effectively manage through today’s dire economic environment and emerge on a firm financial footing. As I mentioned, the Postal Service’s efforts — despite their unprecedented scale — will be insufficient, by themselves, for us to simply break even. They must be accompanied by changes in the laws that govern our operations.
Adjusting the number of delivery days from six to five would have the net effect of returning to an average daily volume of six pieces per delivery. With the same volume spread over a five-day service week, our fixed network costs could be reduced by almost 17 percent. This level of potential savings is not possible within today’s constraints. Through January, we have made tremendous progress in aligning our resources with a reduced workload. With mail volume down 11 percent, we reduced mail processing workhours by 13 percent. We have reduced retail workhours by 11 percent — and we have done that without the need for across-the board reductions in retail service hours.
We have not been nearly as successful in the delivery area, where workhours have been reduced by only 5 percent. That is because delivery workhours, unlike those of other operations, are predominantly fixed. Carrier travel time — from the Post Office to the route, between addresses on the route, and back to the Post Office — does not change in relation to mail volume. In fact, with most mail placed into delivery sequence before the carrier leaves the Post Office, the time spent making a particular delivery may vary little based on the number of pieces delivered to an individual address.
Delivery is one of our most labor-intensive activities. Unlike mail processing, it does not lend itself to technological substitution. Nor does it lend itself to staffing adjustments based on mail flow peaks and valleys or to fluctuating levels of customer demand during the course of a single day, a single week, seasonally, or over longer periods of time. Delivery remains our largest, single cost center. And with revenue per delivery continuing to decline — due to fewer pieces per address and a change in the mail mix to lower-cost products — our overall delivery costs grow proportionately larger. In effect, we are financing a level of service that exceeds a declining demand.
Recent independent polling suggests that our customers are generally amenable to a five-day delivery week. A USA Today/Gallup survey found that 57 percent of respondents see this as a preferred solution to the Postal Service’s financial difficulties. Similarly, a Rasmussen Reports survey found that 69 percent of Americans indicated that they would prefer five-day-a-week service to other alternatives. The Postal Service is the only carrier that offers regular Saturday service — and at regular prices.
Reducing delivery by one day per week could reduce costs by $3.5 billion annually. This offers a significantly higher cost benefit than any other single option for operational cost reductions. If we reject this approach, we rule out our largest cost-management opportunity at this time when we are facing such staggering financial pressures.
The demographics of our employee base also underline the importance of pursuing this option. Today, 162,000 of our employees are eligible to retire under regular rules. Within the next four years, that number will grow to 291,000. After that time, the number of employees becoming retirement-eligible will fall dramatically. There is no better time to reconfigure our service offerings and avoid a situation in which new workforce growth — and its associated costs -exceed current and anticipated future system needs.
Although the financial situation of the Postal Service is grave, it would have been even more untenable if it were not for the aggressive actions we have taken to protect the organization’s viability. We recognize that, despite the sources of our financial distress, the Postal Service itself has the primary obligation to bring costs in line with revenue to the extent possible. We have been doing that and we will continue to do that. Those actions began long before we began to see the effects of today’s economic distress.
The PetersPapers says:
Let me open in providing a statement by Senator Snow of Maine to Potter dated 3/20/09: “A six-day delivery week is essential to ensuring that our nation’s small businesses are able to reach their customers in an appropriate and well-timed manner. According to the United States Postal Service’s (USPS) website, on average the USPS delivers to 9 million businesses each day your trucks are operating. As Ranking Member of the U.S. Senate Committee on Small Business and Entrepreneurship, I am concerned that reducing your delivery week by one day may have devastating consequences for mail-order and internet-based businesses, newspapers, and the millions of small companies that utilize the USPS for timely mail delivery.”
March 25, 2009, 7:59 amIt would seem that Mr. Potter does not appreciate that reduction in service days to the devastated economy that we are trying to repair. Small businesses are the “bread and butter” of our economic system for so many reasons.
Mr. Potter and “Carvin Marvin” have already greatly diminished the clerk craft(and still going)with all of the horrific billions into that would improve efficiency. Is he really saying as a graduate of MIT, that it was obscure to him that the mail volume would be reduced.
Or, think about the UPS “cubiscan” that has appreciately reduced our business with small and larger businesses. Gee, John, how come you didn’t invest into making the USPS more competitive in the “parcel” aspect of competiveness?
I could go on… but, I guess that sooner or later the plan is to turn over all of that “automated equipment” to private contracting because Potter was too incompetant and short sighted to effectively manage the BUSINESS.
Hey John… Retire!
The PetersPapers says:
CORRECTION!
March 25, 2009, 8:03 am“Is he really saying, as a graduate of MIT, that it was obscure to him that the mail volume would be reduced WITH THE ADVENT of E-MAIL?
Mike says:
If we are herting this bad. Why are we not cutting people from the top. You have top people makeing over 160,000 That have been here since 1972. That is over 35 years. That would cut a lot of money. That is regular pay. Not all the extra’s
March 25, 2009, 9:58 amMOOSELODGE says:
DEAR GOOD OLD BOY CLUB ,
March 25, 2009, 11:35 amThere is one problem with the postal service. Management employees salaries are outrageous compared to the union represented employees. THE POSTAL SERVICE has to trim some fat off the hog’s as*!*. By hog’s as*!* I mean all you management morons that are eating up those big salaries. There is no accountability. If you do a bad job you still get a raise. If you violate the collective bargaining contract you still get paid. Hey, John if we are hurting that bad financially than why don’t you cut management salaries by 20%. I bet that would get us back in the black.
KAKA says:
Ask if the USPS will continue to relocate postal management into $1 million dollar homes? Are they still giving out awards to each other?
March 25, 2009, 12:22 pmSomeone doesn't have both oars in the water says:
Potter said he only expects between 10,000 and 15,000 employees to take VERA.
March 25, 2009, 12:30 pmThe PetersPapers says:
“Someone” – CSRS vs. FERS is a big change from 12/31/1983 to 01/01/1984. For FERS emplyees to recieve the ‘THREE TIERED’ (PO retirement, Social security, and TSP goes to a minimum retirement age of 62 +. For “Pooter” to address Congress in any other terms is genuinely deceiptful.
March 25, 2009, 12:39 pmA Thought says:
The postal service LOSING money, is this new? What was the run of years it actually MADE money? This is nothing new and “smells” funny to me. The Service is covering up so the years and years of “free spending” can continue…..anyone who believes the P.O. is in dire straits needs some serious counseling…I do not believe a word of it. But since they insist on beating the dead horse, start by trimming those who do not actually touch or handle the mail, cause their “on paper” ideas are an absolute failure…
March 25, 2009, 1:44 pmAnonymous says:
Jack is taking over for Bernie
March 25, 2009, 3:41 pmtwofisted says:
Another great way to save a huge chunk of change is to get Management to quit breaking the contract with its union employees. I bet an easy billion dollars would be saved if the postal service didn’t have to payout all those grieveances that they lost due to boneheaded mistakes by tryannical supervisors.
March 25, 2009, 7:13 pmThe PetersPapers says:
I wonder if anyone has provided for a cost analysis of how much the USPS pays in commisions to the credit card companies when services are paid for at the front window and where ever???? Cash and carry seems to be a better idea to me!
March 25, 2009, 7:44 pmA%%hole says:
You can’t believe a f%#king thing management says.
March 26, 2009, 2:27 amT the Mailman says:
What happens to every T-6 when we go to five day delivery? How about PTF’s, only work when a regular carrier is on AL or SL? Sounds like lay offs of employees with less than six years service.
March 26, 2009, 3:01 amanon says:
What is your Pension Benefit???
John E. Potter
USPS Pension Benefit
$1,350,318
John E. Potter
CSRS Annuity
30 Years
$2,453,057
H. Glen Walker
FERS Annuity
2 Years
$ 60,702
Patrick R. Donahoe
CSRS Annuity
33 Years
$2,522,570
Anthony J. Vegliante
CSRS Annuity
31 Years
$2,171,701
Mary Anne Gibbons
March 26, 2009, 12:00 pmFERS Annuity
23 Years
$ 815,758
huh says:
Well I have to agree with start with the non-mailhandlers and you could save hundreds of thousands if not millions. Also how about paying back the big $800,000 bonus to help the company. As a matter of fact, go ahead and cut all bonuses. I have “been comended” and yet not even as much as $5 for Christmas.
March 26, 2009, 3:56 pmhuh says:
Although mgmt. should realize that if you cut a day that for business purposes it should be closed only on weekends for residents and especially businesses. Alot of businesses are closed on weekends so to take a day off during the week may cut our throats. Plus then routes will have to be readjusted and what you are going to end up with is more routes and more full time pensions. Plus, when the econome booms how long it going to figure out how to adjust all of the routes accordingly and how bumpy is that going to be!
March 26, 2009, 4:36 pmFireMan says:
Here’s what will really save- 0 delivery days.
March 27, 2009, 12:06 amFrick says:
Cut from the top!! Too many people yelling at you from a phone, making too much money!!!!
March 27, 2009, 6:04 pmmailman says:
Yes the bonuses are not deserved, yes mgmt salaries are too high (and too many managers !) but I really doubt that getting rid of all bonuses and managers would save the BILLIONS of dollars the PO needs to survive. Poor vision and planning led us down this road, as well as the unexpected decline in the economy. I work 10 hours 4 days a week, carrying mine and sometimes HALF of another route due to the decline in volume. That is the “productivity” they claim (on my back) and reward themselves, not the workforce! Automation is necessary and fine, if they know how to use it. They’ve been recording my volume for 35 years but still can’t manage the mail. We’ll have 10 feet of bypass flats that “must go”, creating overtime, the next day 45 minutes undertime. That volume should have been spread out. The USPS spends a lot of money on outside consultants, but draw their managers from employees who basically cannot perform the necessary labor. They should spend some $$ on TRAINING managers by professionals.
March 27, 2009, 6:34 pmRegarding going to a five day week, cutting 1 day will provide up to 15% more available workers- as far as T6′s go, they will provide needed available workers at no extra cost, and cut down on overtime. They won’t be eliminated.
Anonymous says:
reducing delivery by one day will not save the usps 3.5 billion annually. what will save the usps 3.5 billion annually?
1. make pmg potter and his crew take $1 salary every year just like the ceo’s of big corporations until the economy gets back to where it was.
2. Cap their bonuses
3. get rid of excess mdo’s and supervisor’s
4. get rid of rehab employees
5. get rid of employee under 6 years of service
after doing all these…
then, offer early retirement to those who qualified without penalty. it will be costly at the beginning but in the long run usps will save more money than what pmg potter predicted.
March 27, 2009, 9:56 pmmailman says:
Anonymous sure wants to “get rid of” a lot of employees- people who have had a job for 6 years,some who have been injured while performing their jobs- and put them into this economic scene.Nice. You know, Federal employees don’t get ANY unemployment insurance-the USPS doesn’t pay into state funds. Maybe Anonymous and his church would be able to house, feed and clothe the removed employees from his community until they can find work.
March 28, 2009, 8:03 amMark says:
Trash is not picked up more then twice a week, even tho people would prefer it. So why is the Postal Service delivering it more then that? If I got a Postal Delivery Bill like I do for electric and water, and had the option to reduce that bill with a two or three day a week deliver instead of 6. You can be sure I would choose two days a week. Let those who need and think they need it every day pay for it, or come pick it up at the Post Office. After all, the Post Office is now a business, so why not run it like one.
March 28, 2009, 11:42 amAnd one more thing, the senior Carrier at that station would be required to be the Station manager. I’ve never heard of an oganization that picks only those who will raise their hands to be in charge, regaurdless of their ability, knowledge or ability to speak English.
Jack Ass says:
Where do you guys get this? The postal service is not a business. It is a governmnet service. A business in it for profit would never have universal delivery. Rural areas would pay ten times as much because it will always be a money loser. The money is made in cities.
March 28, 2009, 5:35 pmhalfbuck says:
Why is it that Jack Potter does not mention one thing about the fss machines coming online next year. This is the second he has spoken to congress about 5 day work week and forgotten the FSS machines. Is he hiding something? I thought fss was suppose to save a lot of money. Maybe with the mail volume dropping, they shouldn’t have invested billions of dollars into this project. They rather cut jobs and further drive customers away. What do I know, I’m only a letter carrier.
March 29, 2009, 6:27 amPostal Idiot says:
We gots 3 of those pieces of sh*t (FSS) and only one is used. hahahahahhahaha
March 30, 2009, 3:02 amCLERK says:
Hey! How come we haven’t asked Mr Obama for a bailout.Where is our stimulus package.We want to get on the bandwagon like the rest of the country.What I could do with a big fat bonus like the rest of the big wigs got.Yahoo! Get on the Obama train.
April 1, 2009, 3:01 pmEddie marzigliano says:
Let’s do. Save the service and slash costs. Why won’t the unions agree. They’ll lose money too. Nobdy cares about saving the Post Office just their special interests. Five day week. We’ll have Saturday and Sunday off like the rest of the world.
April 3, 2009, 5:52 pmjk says:
I think that we should go to five day a week – there is not enough mail for 6 days a week – we are in different times with email and the internet – for the few that absolutely need whatever day that is cut (which i think it should be on Saturday) they should be paying a premium for it with UPS or FedEx
April 4, 2009, 7:46 pmjacka$$ says:
I say do something about the people with more than 30 – 40 years of service. In my office, these are the guys who milk the office, make the most money in terms of wages and are the least productive and have crappy attitudes. If we layoff those under six years, we will only have slow, grumpy lose money people left in the office. That really does not make any sense.
April 8, 2009, 11:34 pm