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November 16, 2012

Industry Alert:
USPS Posts Huge FY 2012 Loss;
What Lies Ahead?

 

Dear Member & Non-Member:

Yesterday, the US Postal Service reported a fiscal 2012 net loss of $15.9 billion, 6% greater than its own projection of $15 billion. Overall mail volume fell by 5%, primarily in First Class. The USPS also has noted October 15, 2013, as the date it will run out of cash. That is the date it is required to make a workers comp payment to the Department of Labor.

During the USPS’s Board of Governors meeting that I attended Thursday morning in Washington, Postmaster General Pat Donahoe said the big financial loss “has nothing to do with the value of the mail - only due to our restrictive business model. Ideally, comprehensive legislation [Postal Reform] can be accomplished in this Lame Duck session.”

The loss is more than three times greater than the USPS’s FY 2011 loss. PMG Donahoe said that although the USPS is walking a “financial tightrope,” any disruption to mail service “will never happen. We are simply too important to the economy and the flow of commerce.”

ACMA and other mailing concerns have been urging members of the House to pass its Postal Reform bill (H.R.2309) during the lame duck session so as to get it into conference with a Senate Postal Reform bill (S.1789), which was passed last spring. If no bill gets passed into law this year, both bills will be scrapped and the new Congress will have to start all over again next year.

The USPS is banking on Postal Reform so it can spread out future retirees’ health benefit payments longer, end Saturday delivery, and gain greater flexibility to close post offices and processing plants, among others.

Most damaging among the fall-off in overall mail volume to 159.9 billion pieces from 168.3 billion last year was an 8% drop in First Class volume, which is the agency’s most profitable mail product. Despite the volume decline, postal revenues still dropped, albeit by less than 1% to $65.2 billion. Other noteworthy figures reported today:

  • Standard mail volume fell 4% to $16.4 billion
  • Overall expenses dropped $900 million
  • Total Factor Productivity increased, leading to compounded growth from 2000 of 1.1%.
  • The number of full-time career employees has now decreased from 776,000 in 2001 to 578,000 in FY '12; that figure is forecast to drop another 17% to 496,000 in FY ‘13.
  • The USPS’s FY ’13 Integrated Financial Plan calls for further expense reductions netting $800 million in savings after absorbing expected inflationary increases from fuel, purchases, cost of living adjustments, etc.
  • The USPS forecasts another $7.6 billion loss for FY ’13 in the absence of Postal Reform legislation.

The 2013 plan does not include the required future retiree health fund payment of $5.6 billion the USPS clearly does not have the resources to make. Corbett pointed out this is a projection that can change at any time and given the razor-thin liquidity, very small changes to inputs can have large impacts to the forecast.

Outlook & Your Input
While continuing red ink is not a barrier for informed mailers, we concur with the PMG that liquidity is unlikely to cause any disruption in mail services. Nevertheless, Congress should act immediately to address postal issues in the Lame Duck session to remove the specter of disruption that impinges on its ability to market to less informed mailers. There is some reason for optimism as the two prior postal reform laws were also passed into law during Lame Duck sessions.

That said, ACMA is calling on all mailers to communicate to their Representatives and Senators the need to pass reform this Congress. It will only be by steady constituent pressure from you that we can hope to see these measures adopted in what promises to be a busy legislative calendar between now and year’s end.

Sincerely,
Hamilton Davison
President & Executive Director
American Catalog Mailers Association
www.catalogmailers.org
Direct: 1-800-509-9514
hdavison@catalogmailers.org

Phone: 800.509.9514
info@catalogmailers.org

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