Postal Service proposes cutting 120,000 jobs, pulling out of health-care plan

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    Aug 12, 2011 9:20 PM GMT
    http://www.washingtonpost.com/politics/usps-proposes-cutting-120000-jobs-pulling-out-of-health-care-plan/2011/08/11/gIQAZxIM9I_print.html

    The financially strapped U.S. Postal Service is proposing to cut its workforce by 20 percent and to withdraw from the federal health and retirement plans because it believes it could provide benefits at a lower cost.

    The layoffs would be achieved in part by breaking labor agreements, a proposal that drew swift fire from postal unions. The plan would require congressional approval but, if successful, could be precedent-setting, with possible ripple effects throughout government. It would also deliver a major blow to the nation’s labor movement.

    In a notice informing employees of its proposals — with the headline “Financial crisis calls for significant actions” — the Postal Service said, “We will be insolvent next month due to significant declines in mail volume and retiree health benefit pre-funding costs imposed by Congress.”

    During the past four years, the service lost $20 billion, including $8.5 billion in fiscal 2010. Over that period, mail volume dropped by 20 percent.

    The USPS plan is described in two draft documents obtained by The Washington Post. A “Workforce Optimization” paper acknowledges its “extraordinary request” to break its labor contracts.

    “However, exceptional circumstances require exceptional remedies,” the document says.

    “The Postal Service is facing dire economic challenges that threaten its very existence. . . . If the Postal Service was a private sector business, it would have filed for bankruptcy and utilized the reorganization process to restructure its labor agreements to reflect the new financial reality,” the document continues.

    In a white paper on health and retirement benefits, the USPS said it was imperative to rein in health benefit and pension costs, which are a third of its labor expenses.
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    Aug 14, 2011 8:11 PM GMT
    More on the US Postal Service:
    http://www.businessweek.com/magazine/content/11_23/b4231060885070.htm?campaign_id=rss_topStories

    It takes an enormous organization to carry out such a mission. The USPS has 571,566 full-time workers, making it the country's second-largest civilian employer after Wal-Mart Stores (WMT). It has 31,871 post offices, more than the combined domestic retail outlets of Wal-Mart, Starbucks (SBUX), and McDonald's (MCD). Last year its revenues were $67 billion, and its expenses were even greater. Postal service executives proudly note that if it were a private company, it would be No. 29 on the Fortune 500.

    The problems of the USPS are just as big. It relies on first-class mail to fund most of its operations, but first-class mail volume is steadily declining—in 2005 it fell below junk mail for the first time. This was a significant milestone. The USPS needs three pieces of junk mail to replace the profit of a vanished stamp-bearing letter.

    During the real estate boom, a surge in junk mail papered over the unraveling of the postal service's longtime business plan. Banks flooded mailboxes with subprime mortgage offers and credit-card come-ons. Then came the recession. Total mail volume plunged 20 percent from 2006 to 2010.