A Bailout for the U.S. Postal Service? - Business Week
The USPS's problems are well known: More customers are paying bills online and choosing FedEx (FDX) and United Parcel Service (UPS) to send overnight packages. Labor and retiree health-care costs are exploding: The service has a $50 billion obligation to its retiree health fund and is in a dispute with Congress about who should pay that balance. When the USPS reported a record annual loss of $8.5 billion last month, Representative Darrell Issa (R-Calif.), who will chair the House Oversight and Government Reform Committee, warned that the Postal Service must trim costs to match revenues so "taxpayers don't get stuck paying for a bailout."
The service spends 78 percent of its budget on salaries and benefits, higher than either FedEx's 43 percent or UPS's 61 percent. The American Postal Workers Union, the larger of the postal unions, is resisting further cutbacks and instead wants to "restore work that has been outsourced or given to supervisory personnel," union President Cliff Guffey said in a Dec. 1 statement. The best hope may be that volume climbs for the USPS's two biggest customers, FedEx and UPS, which use the service for last-mile delivery, since mail carriers go to all 151 million U.S. addresses six days a week—at least for now.
The bottom line: The U.S. Postal Service, blocked by Congress, unions, and regulators from making tough business decisions, may need a bailout next year.
The USPS's problems are well known: More customers are paying bills online and choosing FedEx (FDX) and United Parcel Service (UPS) to send overnight packages. Labor and retiree health-care costs are exploding: The service has a $50 billion obligation to its retiree health fund and is in a dispute with Congress about who should pay that balance. When the USPS reported a record annual loss of $8.5 billion last month, Representative Darrell Issa (R-Calif.), who will chair the House Oversight and Government Reform Committee, warned that the Postal Service must trim costs to match revenues so "taxpayers don't get stuck paying for a bailout."
The service spends 78 percent of its budget on salaries and benefits, higher than either FedEx's 43 percent or UPS's 61 percent. The American Postal Workers Union, the larger of the postal unions, is resisting further cutbacks and instead wants to "restore work that has been outsourced or given to supervisory personnel," union President Cliff Guffey said in a Dec. 1 statement. The best hope may be that volume climbs for the USPS's two biggest customers, FedEx and UPS, which use the service for last-mile delivery, since mail carriers go to all 151 million U.S. addresses six days a week—at least for now.
The bottom line: The U.S. Postal Service, blocked by Congress, unions, and regulators from making tough business decisions, may need a bailout next year.
