USPS $1.1B Loss Could Force Maximum Rate Hike Next Year

The U.S. Postal Service has a fiscal year-to-date net loss of $1.13 billion, including a greater-than-expected loss for the third quarter, at $1.1 billion. The USPS says it expects a year-end net loss. That could spell more bad news for the magazine industry.

“The next rate increase will most likely be the maximum under the law,” ABM Washington Counsel David Straus tells FOLIO:. “The way the CPI [Consumer Price Index] is going, you could be looking at periodicals rates going up 5 or 6 percent for some publications—about double the 2.9 percent increase we saw in May.”

The next rate increase, according to Straus, “almost certainly” will be May 2009.

For the third quarter 2008, the Postal Service reported operating revenue at $17.9 billion, down 2.4 percent from the same period in 2007. Operating expenses were $19 billion, an increase of 1 percent from the third quarter last year. Mail volume dropped 5.5 percent during the quarter, reaching 48.5 billion pieces.

According to Postmaster General John Potter, mail volume may not return to previous levels when the economy rebounds. “This requires that we significantly accelerate process improvements and the realignment of resources in order to achieve long-term financial success,” he said in a statement. “Failure to do so will threaten our ability to meet our mission of providing universal service at affordable prices.”

Under the Postal Accountability and Enhancement Act, the Postal Service may “bank” the difference between the CPI cap and the implemented price changes and has extensive flexibility to vary rates within classes as long as the class average is CPI-limited. However, Straus says there will be pressure on the Postal Service about whether the price cap can be pierced to cover attributable costs.

“If you have a price cap, you do what you can with costs but service will be affected,” he says. “The MPA and ABM are working with the Postal Service to restrain periodical costs, but it will be tough.”

Intelligent Mail Barcode Update

At yesterday’s Mailers Technical Advisory Committee meeting, Postmaster General Potter reportedly announced, despite a press release saying that no pricing decisions have been reached, that there will not be a discount for mail sent using the IMB, according to Straus. The IMB would require an 11-digit “intelligent” barcode on all automation-rate first-class mail, periodicals, standard mail, and bound printer matter flat-size pieces.

“This was the number one topic of discussion” at the meeting, Straus says. “Mailers are very upset and I think are close to rebellion.”

COMMENTS: 11

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Wow! Did Jack Kervorkian Draw Up the USPS 2009 Biz Plan?

Submitted by Anonymous on Thu, 08/07/2008 - 14:57.

This is unbelievable news. I guess we all knew it was coming, but it is still unbelievable. Media firms are AGAIN subsidizing their own execution by paying for postal increase bullets to kill their businesses from the USPS firing squad. Volumes are going to keep dropping, so the USPS will keep raising prices, so I can only hope the digital innovation our industry needs gallops forward, and we see the USPS put itself out of business. Planned Obsolesence?

Possible sollution

Submitted by Bryan on Thu, 08/07/2008 - 14:59.

Let's face facts, people are mailing less. With email, and online bill paying growing at an astonishing rate, even the companies sending the bills out are pushing for e-bills. Some don't even put envelopes in with their invoices any longer. The post office management are way past due on adjusting their way of operating. We don't need Saturday delivery. Just cutting that out would no doubt have an impact, especially with transportation costs being what they are today. With the direct mail marketers cutting back, or being more picky in terms of how and when they send out their direct mail packages, what's left for the post office to hit upon? The consumer? Perhaps, (and they already have) but with the impact the other delivery service providers have on that business, the only thing left to nail with an increase, is the periodicals. Magazines. That too will become less and less, as the cost to print and distribute a magazine reaches the boiling point of no longer being feasible. You will drive the magazine industry to create online versions. They are doing it now, but they will be forced to do it even faster, with increases in the postage for periodicals. 5% or 6% is crazy! What's left? Privatization? I am all for a person making a good living, being paid a reasonable, livable salary, but I know way too many people whom work for, or have worked for the post office, and they are being paid far greater than the private sector would allow. But, that is not for me to determine. Facing the realities with government spending are virtually non-existent with nearly all government agencies. The post office is no different. It's not their money, why should they care? Well, they better care! It may be too late already. Status quo in this technological juggernaut will get you in the predicament the post office currently faces.

saving money

Submitted by Jay on Thu, 08/07/2008 - 21:50.

By eliminating one delivery day in the week would eliminate at least 20,000 employee positions, since there would be no need for a t-6 relief person on each route. If you times that by an average salary of $45,000 the yearly savings would be about $900 million. Gas savings for just one less day could add enough to make the savings around $1.0 billion. And if things continued in the downward spiral, going to a four day 10 hour work week would capture even more savings. The Postal Service needs to reduce management levels for farther savings and allow more local running of offices as long as they are productive. The Postal Service has two different delivery systems, one of which they feel cost them less. If that is the case then they need to do whatever is required to get to that one delivery system (rural vs city). They need to remember they are a public service mandated to break even and provide quality service not quantity deliveries. Can the Postal Service survive you betcha, but only if all the players are willing to do what it takes. Unfortunatly from what I have seen so far they prefer to talk and talk and then just sit on their hands. Wake up, drink some coffee and get the job done.

Reality

Submitted by Eddie on Fri, 08/08/2008 - 09:39.

The limitations of the Postal Service are in place not by choice, but by law. It remains the only means of communication in which you do not need to pay a fee prior to usage. Phone and internet services are fee based that you must pay whether you use them or not. That is why it is a requirement of the organization to provide universal service for the entire country, it's a service everyone can use. According to Pew Internet& American Life Project, 27% of adult Americans are not internet users. (!) Hard to believe, but for some people, the mail is vital. The USPS is fighting just to be able to close facilities that can be consolidated or are no longer viable. Just recently, there were attempts to close a PO in Kansas (?) and the community was outraged! We have seen a greater segmentation within the organization( Retail/Commercial, Shipping Services/Mailing Services) that I believe is leading to the eventualy privitization of the Shipping Services segment. In doing this, they can more aggressively pursue package business currently held by competitors, and subsidize the Mailing Services segment.

mid-western truth

Submitted by Anonymous on Sat, 08/09/2008 - 07:46.

If you start off life as a farmer,and slowly over the years you have a need to sell small parts of the farm off,SOONER-OR-LATER, you will sell the entire farm, "IT WILL CHANGE YOUR TITLE OF JOB,WHAT DO YOU CALL YOURSELF"??

Postal Service loses 1.1 billion dollars

Submitted by mike steele on Sat, 08/09/2008 - 10:19.

PRIVATIZE THIS DINOSAUR before it falls into a tarpit. This was the only federal agency that Bush didn't touch for some reason during his administration. Probably too toxic!! PRIVATIZE before the American people go elsewhere permanently.

Pinheaded postal "remedies"

Submitted by Kieran on Sun, 08/10/2008 - 23:42.

Privatize the USPS! Make it more like our sterling oil and banking corporations, where savvy strategy and bold leadership really make things happen for the betterment of the customer. Dinosaur? Check out the on-time delivery scores and the customer satisfaction index before blowing the one-note tune titled privatization.

USPS $1.1B Loss Could Force Maximum Rate Hike Next Year

Submitted by Anonymous on Tue, 08/12/2008 - 13:23.

Kieran, Hey privatization is not the answer! You really haven't a clue to what th P.O. does for you outside your normal deliveries! You ought to a little research how it affects your life in other ways, that which--- you haven't a clue? You know the story of "Humpty-Dumpty" don't cry wolf when it's gone! Who do you think gets the "deliveries" of parcels that FedEx and UPS find unprofitable to deliver themselves?? Last but not least what are you willing to pay FedEx & UPS once were gone? Whom do you think moves the majoriety of the mail nowadays for us? They will have to make up there loss of billions someway! And guess what...... it falls right into your lap of the public or the shipper !!!!!!!!!!

1.1 b loss

Submitted by Anonymous on Tue, 08/12/2008 - 17:57.

We need to loose saturday delivery. We used to deliver the mail twice a day way back in the old days. It is time to get rid of as many part time help as possible in order for us carrer posistions to stay alive. Also time to make everthing like the rural routes the way them guys case up everything in one bundle and deliver it like that them guys fly.

1.1B loss

Submitted by Anonymous on Thu, 08/21/2008 - 18:03.

I am rural and we are more cost effective which is why they are going to switch us to city type delivery. I am in the office more at this point but they would prefer us on the street longer 3-4 hours-longer burning gas. I guess someone at the top never noticed the price of gas going up. To add insult to injury, they knew we were more cost effective-which is why that had to be stopped.

saving with the postal service

Submitted by D. Brown on Sun, 09/07/2008 - 19:11.

Not only am I rural carrier, but also a customer. Businesses need to check their shipping costs and see the USPS does NOT add a fuel charge, saving them up to 30%! I want my mail delivered ONLY by a Federal Employee who has pride,joy,& honesty in their job as I do.

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