March 2, 2010 / 10:20 PM / 9 years ago

UPDATE 1-U.S. post office looks to cut costs as mail dips

* Postal service facing shortfall as mail volume drops

* Price hike and service changes seen

* Union opposes dropping Saturday service (Recasts with comments from USPS CFO, union spokeswoman)

WASHINGTON, March 2 (Reuters) - The U.S. Postal Service, faced with less mail and bigger shortfalls, plans to cut Saturday delivery and overtime, raise prices and trim its workforce by about 30,000, its chief financial officer, Joseph Corbett, said on Tuesday.

Because of e-mail and private delivery companies, traditional mail volume is expected to be down from last year by about 10 billion pieces in 2010 with first class mail expected to drop 37 percent by 2020, leaving the service with a cumulative shortfall that could hit $238 billion by 2020.

Faced with that shortfall, Corbett said the service was planning a moderate increase in stamp prices and pressing for a law to be changed that would allow it to drop Saturday delivery.

More online sales and expanded efforts to sell stamps and provide other services at grocery stores and other retailers would likely lead to shuttered post offices.

Corbett told Reuters the service also planned to have its roughly 596,000 employees working less overtime, and the workforce itself would likely be reduced by about 30,000.

USPS has posted net losses since 2007. It faces stiff competition from e-mail as well as FedEx (FDX.N) and United Parcel Service (UPS.N).

Other efforts to save money include restructuring how it funds retiree health benefits, said Corbett.

The Postal Service said last month that it may not be able to meet obligations to make about $6.6 billion in cash payments in September and October to fund retiree health benefits and for its workers’ compensation liability.

Last year, Congress restructured similar payments, but there is no assurance that similar adjustments will be made this year, USPS said.

Sally Davidow, a spokesperson for the American Postal Workers Union, one of several representing postal workers, said that she supported restructuring the payments.

“That’s an obligation that no other federal agency has,” she said, adding that the union felt that that change and others would make it unnecessary to cut Saturday delivery.

“We object to a reduction in the number of delivery days,” she said.

In February, USPS posted a loss of $297 million for the first quarter of its fiscal year, blaming the recession and the use of electronic mail. The loss marked a slight improvement over the prior-year period due to cost cutting, but USPS warned the trend was worrisome.

Reporting by Diane Bartz; Editing by Sandra Maler

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