The U.S. Postal Service could save $3.1 billion to $4.1 billion by putting a freeze on hiring and consolidating underused mail processing plants, thereby eliminating the need for another postage rate increase, the Magazine Publishers of America said yesterday.
“The postal service does not need another rate increase. They can operate in the black without laying off employees simply by freezing hiring and without a reduction in service by consolidating facilities,” said Nina Link, the MPA's president/CEO. “The postal service could save at least $3 billion to $4 billion from a reduction in labor costs as a result of normal attrition and from selling underutilized processing plants.”
Link said the MPA was encouraged by statements from postmaster general William J. Henderson, who said at last week's Fall National Postal Forum that “cost cutting is finally being considered as an alternative to raising rates.”
“We trust the postal service will implement the proposals he revealed at the postal forum,” Link said. “We hope they also will adopt our recommendations as well.”
Henderson said at the forum that the USPS is not taking a potential 10 percent to 15 percent rate increase as a given and asked deputy postmaster general John Nolan to explore alternatives to filing a double-digit rate increase this year.
The MPA noted that USPS expenses last year totaled nearly $65 billion. About $50 billion, roughly 75 percent, was directly related to labor costs. Attrition of 3 percent would lower the USPS' annual expenses by roughly $1.5 billion. Likewise, a 5 percent attrition rate would decrease annual expenses about $2.5 billion.
As for consolidating underused mail processing plants, the MPA said that in the fourth quarter of fiscal year 1998, the bottom third of USPS mail processing plants performed, on average, 135 million piece sorts. The average number of sorts across all mail processing plants in that period was about 425 million pieces. If the postal service could consolidate plants so that each consolidated facility performed 425 million piece sorts, it could close two-thirds, or about 100, of these plants.
The MPA also said that according to recent postal reports, costs for new plants range from $12 million to nearly $100 million. Assuming the USPS could sell the 100 smaller plants for even $12 million each, the consolidation would generate more than $1 billion. Closing these facilities also would allow the postal service to enjoy greater economies of scale in mail processing, allowing it to shed $400 million in fixed labor and associated overhead costs.