“The loss of first class volume puts a lot of additional cost pressure” on the postal service, said Donahoe. “We eventually will have to go from six to five days from a delivery standpoint to remain in the black.”
Donahoe explained, “our first class volume is dropping at a rate of six percent per year. Cumulatively over the last three years, we’ve lost 20 percent of our first class volume. Every first class stamp brings in 20 cents of contribution to the operating expense to cover six day delivery and keep all the post offices open. That’s where the pressure is. As that goes down, even if we resolve the health care issues, we’ve still got problems with delivery days.”
By taking one delivery day out of the mix, costs are cut by one-sixth “and it’s a $3 billion dollar one time change,” notes Donahoe.
Without “tremendous cost reductions” in other areas like substantial wage reductions, Donahoe said there’s no other choice but to cut a delivery day. “We will,” he said simply. “We have to.”
Donahoe said the choice to cut back a delivery day seemed to be understood by postal patrons. “Seventy percent of the American public say they’re fine with that versus giving the postal service some kind of government bailout or substantially increasing prices and we think that we should follow what the customers are recommending to do.”
Here’s what we’re doing: we have, in the Postal Service, we have been reducing head count through attrition with productivity improvements over the last ten years, we’ve reduced the head count in this organization by 225,000 – 100,000 in the last three years. So this is an on-going effort to streamline the Postal Service.
Recently announced reduction in administrative staffing, some direct line supervision and postmasters will cut another 7,500 jobs, said Donahoe. “We’ll do it through attrition, through VERAs, and we’ll also, if need be, work through the RIF process.”
There are, said Donahoe, no plans for mass layoffs. “No, we’re not planning on anything like that.” He said the USPS hasn’t really hired anybody in three years.
There’s always going to be some pockets where you have some over staffing, and in some cases we have under staffing, but we want to make sure that we’re very careful from a hiring standpoint there because, as you know, we’ve talked about the need at some point to move from six day delivery to five day and we don’t want to bring people on and then have to turn around and show them the door. So we’ve worked very hard to manage through that without having to bring additional staffing on to cover delivery routes.
Donahoe said he had no doubt that a favorable decision on the health care funding issue would mean the USPS would financially break even. “Yup. I’m sure that we will not only break even, we will get back in the black and pay our debts off.”
A lot to look forward to after the first week on the job!