Despite budget, USPS CFO backs 5-day week

President Barack Obama’s budget for fiscal year 2011 includes language that shows his administration supports requiring the US Postal Service to deliver mail six days per week. The budget’s wording explicitly says “six-day delivery and rural delivery of mail continue at not less than 1983 level.”

However, Joseph Corbett, the Postal Service’s CFO and EVP, says that his agency will soon reveal plans for five-day delivery to Congress and stakeholder groups. He said the wording of the budget is routine language included in every appropriations bill since 1983.

Corbett told DMNews that the elimination of Saturday delivery is “the single most effective way to reduce costs,” especially as mail volumes decline and are not expected to return to their earlier levels of 200 billion pieces.

“We need fundamental changes. We need a level playing field where we can operate with speed and flexibility. We can’t react quickly enough to changes in our business, like volume decline,” he said about the agency’s cost-reduction strategy. “We need to be able to work more quickly to make changes and adapt, while minimizing the impact on stakeholders.”

The USPS, which lost $3.8 billion in fiscal 2009, projects a loss of $7.8 billion this year if Congress does not amend its payment schedule for retirees.

This month, the Postal Service plans to release its operational plan for transitioning to five-day-a-week delivery. However, there has been little enthusiasm in Congress for service reductions, even as lawmakers acknowledge the USPS’ dire financial situation. Many members of Congress have urged the agency to look at other ways to reduce costs rather than eliminating Saturday delivery.

Capitol Hill sources told DMNews that members of key oversight committees await a comprehensive briefing on the USPS’ report, and they expect the agency to take every relevant factor into account, including impact on volume, before making a decision.

Corbett said the Postal Service expects a receptive audience in Congress when it presents its five-day-delivery plan, which he says has addressed many of the concerns raised by customer groups.

“A majority of these came from a lack of understanding of what we want to do in the five-day environment,” he said. “We have met with a number of customer groups and stakeholders and listened to their concerns. I think they are going to be quite impressed with the fairness of this plan.”

John Potter, postmaster general and CEO of the USPS, and the Postal Board of Governors have campaigned in the past year for the flexibility to eliminate Saturday delivery and processing, saying it would reduce costs by $3.5 billion annually. The Postal Regulatory Commission, however, puts the savings at about $1.9 billion because of volume lost due to a reduction in service.

Corbett said the Postal Service also remains committed to Potter’s pledge not to seek a rate increase this year, despite recent calls by the PRC’s public representative for an “exigent” rate increase. The public representative has suggested the USPS implement a 20% rate increase on market-dominant products over the next two years to meet its financial obligations. Corbett said the Postal Service believes such a dramatic price increase would depress volumes even further and usher in a “downward spiral.”

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