November 8, 2011 / 11:11 PM / 6 years ago

Lagging economy U.S. postal chief's "biggest fear"

WASHINGTON (Reuters) - The U.S. Postal Service is on the brink of bankruptcy, and its top official’s worst fear is that a limping economy will derail the agency’s recovery.

The agency is bumping up against its $15 billion government borrowing limit, expects to report as much as $10 billion in losses for the last fiscal year, and is pinning its hopes on a congressional overhaul to get back on its feet.

Prolonged economic pain would deliver a fresh blow to the Postal Service’s chances of becoming profitable again.

“My biggest fear from a Postal Service standpoint is that the economy continues to lag and just doesn’t generate the commercial interest that we need to continue to grow Standard Mail and packages,” Postmaster General Patrick Donahoe told the Reuters Washington Summit on Tuesday.

A sharp downturn in the U.S. economy could cause mail volumes to plummet 30 percent to officials’ worst-case scenario of 118 billion pieces of mail by 2020, compared to about 168 billion pieces this year, Donahoe said.

Total mail volume has fallen about 20 percent since 2006 as the growth of email and online bill payments coincided with a recession that caused businesses to limit spending on catalogues, advertisements and other Standard Mail.

Donahoe said the Postal Service expects total mail volumes to fall about 24 percent by 2020 but a poor economy could accelerate the drop. He also said sustained high unemployment could convince mailers that labor is cheap enough they could save money by delivering magazines, advertisements and other mailings themselves.

One bright spot has been an uptick in catalog volumes in the last few months, Donahoe said, a positive sign for the holiday season, when mail volumes usually are highest.

U.S. Postal Service Postmaster General Patrick Donahoe addresses the Reuters Washington Summit in the Reuters newsroom in Washington, November 8, 2011. REUTERS/Jonathan Ernst


The Postal Service, which lost about $20 billion in the four years through 2010 and receives no taxpayer money to fund its operations, is again nearing a deadline for a $5.5 billion payment it cannot afford.

The payment, to pre-fund retiree health benefits, was due in September, but Congress extended it to November 18.

Donahoe said he believes lawmakers will extend the deadline again in a continuing budget resolution expected to fund the government for the next few months.

Several lawmakers have offered bills proposing solutions to the agency’s financial crisis, but the U.S. House of Representatives and the Senate have taken different approaches toward overhauling the Postal Service.

Sponsors of leading bills have yet to agree on how the agency should close post offices, when to allow it to move to five-day mail delivery, and other issues.

“My other big fear is that I can’t get the legislation resolved to get all the things done that we need to get done,” Donahoe said. “That would be problematic for the entire industry.”

He said the deficit-reducing congressional “super committee” still could tack postal reform on to its plan, due out later this month. President Obama included Postal Service relief in his deficit reduction proposal earlier this year.

Postal officials have begun a study of thousands of post offices and hundreds of processing facilities for possible closure, among other cost-cutting moves. But Donahoe said without action from Congress, the Postal Service could run out of money before the end of fiscal 2012, that began October 1.

“Theoretically we’re bankrupt,” he said. “We could be in trouble by next August if something isn’t done legislatively.”

Reporting by Emily Stephenson and Lily Kuo; Editing by Tim Dobbyn

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