EcommerceBytes-NewsFlash, Number 2937 - November 16, 2012     3 of 5

Postal Service Records Record $15.9B Loss in Fiscal 2012

By Kenneth Corbin

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The U.S. Postal Service reported its latest multi-billion dollar loss on Thursday, as agency officials reiterated their plea to members of Congress to pass legislation extending relief to the cash-starved organization.

For the fiscal year ending Sept. 30, the USPS reported net losses of $15.9 billion, up from $5.1 billion the previous year. Accounting for 70 percent of that record loss was $11.1 billion in payments to prefund health benefits for retirees that the agency was required by law to make, an obligation that the Postal Service ultimately defaulted on during the year.

"It's critical that Congress do its part and pass comprehensive legislation before they adjourn this year to move the Postal Service further down the path toward financial health," Postmaster General and CEO Patrick Donahoe said in a statement.

In addition to seeking a reprieve from the prefunding obligation, the Postal Service is asking Congress to grant it new authorities to reduce its delivery schedule and adjust prices, and is also seeking a stronger bargaining position in its labor negotiations and a refund of an overpayment the agency made to the Federal Employees' Retirement System. The agency is also looking for more flexibility to sell non-postal products and services.

Subtracting the prefunding requirement for retiree benefits and other mandatory payments associated with long-term workers' compensation, net losses for the fiscal year would have totaled $2.5 billion, the Postal Service reported.

Packages continue to provide a bright spot on an otherwise dreary balance sheet. Package revenues increased $926 million, or 8.7 percent, over the fiscal year, with volume up 244 million pieces.

With many of the structural costs beyond its control and in the hands of Congress, the Postal Service has been pursuing a number of initiatives to slash expenses and expand its revenue lines, including a restructuring plan that would dramatically reduce its workforce and network of retail and processing facilities.

Postal Innovations
The agency has also been tinkering with innovations to its marketing and delivery businesses, including an overhaul of its Click-N-Ship product and the trial launch of the gopost lockers for secure pickup and drop-off of packages outside of USPS retail facilities.

Then just this week, the Postal Service won approval from regulators to pilot a program to offer same-day package delivery. In the initial market test of Metro Post, to be conducted in San Francisco, the Postal Service plans to partner with as many as 10 ecommerce vendors that also have physical locations both in the region and around the country to determine the viability of the new product that could ultimately offer online sellers a new option for same-day local delivery. A spokesman for the Postal Service declined to identify the vendors it is partnering with for the Metro Post trial.

"We continue to do our part to grow revenue and reduce expenses by making our operations more efficient and by providing our customers with new and expanded services to meet their mailing and shipping needs," Donahoe said. "Additionally, through the expanded use of technology, including better use of digital tools and mobile technology, we are providing business mailers with new opportunities to connect with customers in a more individualized way."

Losses and Workforce Issues
The encouraging signs in the package business have not been enough to offset the sustained losses in the Postal Service's core businesses. Revenues from First-Class Mail, the agency's most profitable product, declined $1.16 billion, or 3.9 percent, in fiscal 2012, while Standard Mail revenues tumbled $747 million, or 4.3 percent.

The Postal Service also reported significant reductions in its labor force, with work hours decreasing by 27 million, or 2.3 percent, in 2012. Those cuts came as the number of delivery points that the Postal Service reaches increased by 1.3 million over the past two years.

"These work hour reductions reflect our efforts to improve productivity and to respond to the decline in mail volume," said USPS Chief Financial Officer Joseph Corbett. "Since 2000, we have reduced work hours by a cumulative total of 504 million work hours, equivalent to 286,000 employees, or $21 billion, in expense savings each year."

Nevertheless, the Postal Service reported that at the end of the fiscal year, it reached its statutory borrowing limit of $15 billion for the first time, though Corbett said that postal operations and delivery have not been disrupted, and that the agency continues to pay employees and vendors on schedule.

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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