UPDATE 2-U.S. Postal Service to close, consolidate 140 mail sites
* USPS to keep overnight delivery for most local mail
* Second round of closings planned for 2014
* Plan expected to save $2.1 bln, eliminate 28,000 jobs
By Emily Stephenson
WASHINGTON, May 17 (Reuters) - The U.S. Postal Service will proceed with a plan this summer to shut mail-processing facilities as part of its cost-cutting effort but will spread out the closings to maintain overnight delivery of local mail.
The agency said on Thursday it would consolidate processing at 140 of its 461 sites by February 2013, moving processing from small facilities to larger ones, and shrink the area where customers can expect mail to be delivered the next day.
It uses the word "consolidate" and not "close" because many of the small processing centers also house retail windows and other services for post office customers.
A second round of closings, which would begin in February 2014, would consolidate an additional 89 processing sites, USPS Chief Operating Officer Megan Brennan said.
The agency previously said it would consolidate about 220 processing sites and end next-day delivery to reduce overnight work. After protests from lawmakers and businesses, USPS tweaked the plan to keep next-day delivery for a few years but said it must scale down its processing network as Americans send less mail.
"This two-phased approach essentially stretches our time-frame to implement the consolidation. It does so in a way that gives our customers and employees the time to plan and adapt to the changes we are making," Brennan said.
The Postal Service, which does not rely on taxpayer funding, has been losing billions each year as rising Internet use erodes mail volumes and annual payments drain its cash.
The agency said last week it lost $3.2 billion in the first three months of 2012.
USPS officials say mail volumes are too low to justify the current number of facilities. The agency last fall proposed to close hundreds of processing sites and more than 3,500 money-losing post offices to rein in costs.
The plans drew protests from all corners. Many lawmakers opposed the loss of middle-class jobs in their states, while newspapers and advertisers said ending overnight delivery would cost them money and customers.
The Postal Service agreed in late 2011 to a moratorium on closings, which ended on Tuesday.
The USPS last week scrapped its plans to close post offices, instead announcing it would reduce hours at 13,000 small offices.
Mail processing consolidations will begin this summer and are expected to save about $2.1 billion per year when fully implemented in late 2014.
About 80 percent of the savings would come from reducing the workforce by 28,000 employees during that time, Brennan said.
The new plan would maintain next-day delivery for most local mail through 2013, Postmaster General Patrick Donahoe said.
For instance, mail sent from Washington, D.C., to Gaithersburg, Maryland, would be delivered the next day. But mail sent to Baltimore would take two days, Donahoe said. The delivery times would likely change again once the plan is fully implemented in late 2014.
Art Sackler of the Coalition for a 21st Century Postal Service, a business mailing group, said the plan is a good first step toward streamlining the agency.
"Some may disagree with the specific decisions that were made, but all should agree that the Postal Service must shrink to match its current and foreseeable volume of mail," he said.
Donahoe said USPS needs action from Congress to staunch the annual losses. The Postal Service also wants to eliminate an annual payment for future retiree health benefits, end Saturday mail delivery and tap into a surplus in a retirement account.
The Senate passed postal legislation last month that would make some of these changes, but the House of Representatives has not yet voted on its version. Senator Joe Lieberman, one author of a bipartisan Senate bill, used Thursday's announcement to urge the House to vote.
"While the (postmaster general) is moving cautiously now, the financial condition of the Postal Service continues to deteriorate, and he will not be similarly restrained next year," Lieberman said. "Congress must approve legislation as soon as possible to return the postal service to solid financial ground before essential services are lost for millions of people."
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