U.S. Postal Service Loses $740 Million

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People ought to get used to the fact that farmers cannot get mail more than twice a week, city dwellers should go without Saturday delivery, hundreds of post offices should be closed, and tens of thousands of postal workers should be fired.

The U.S. Postal Service had a net loss of $740 million in its fiscal third quarter, which left it with a year-to-date net loss to $3.9 billion. The agency claimed that some measure of cost savings was critical to a tiny improvement from last year’s results. However, no one who has analysed the Postal Service figures believes that anything short of a massive restructuring will cure its ills.

The Postal Service pointed to the same modest number of culprits all over again:

Contributing to the third quarter loss were continued expenses for the legally-mandated prefunding of retiree health benefits, the continuing decline of First-Class Mail volume and the continuation of six-days-per-week of mail delivery.

Perhaps Postmaster General and CEO Patrick Donahoe does not believe that people can think in more than threes at any one time. Or the unions and congressional interests that do not want to see huge layoffs have pushed him into a corner with very few options.

The prefunding of retiree health benefits is the largest financial hurdle for the service. Although management has pummeled this issue for years, nothing has happened. That leaves the Postal Service with the old-fashioned way to balance the books: cut costs to the bone. First class mail will not be back because of the Internet. No one needs delivery six days a week. Farmers have made a radical lifestyle decision, which comes with a number of drawbacks. In other words, a lack of access to regular delivery is part and parcel of living in remote areas.

Fifty years ago, there was no Internet, no United Parcel Service Inc. (NYSE: UPS) (not in its current incarnation) or FedEx Corp. (NYSE: FDX) and no fax. The USPS has not become a buggy whip company, but it is close enough for government work.

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