U.S. Postal Service Will Have No Money by October

Thursday, 10 May 2012 10:19 PM

The U.S. Postal Service said it lost $3.2 billion in the quarter ended March 31 and will temporarily run out of cash in October, adding urgency to its pleas for Congress to let it make changes including ending Saturday delivery.

The service forecast a $9.1 billion loss for the 12 months ending Sept. 30, not counting a required $5.5 billion payment for future retirees’ health benefits, Chief Financial Officer Joe Corbett said today on a conference call with reporters.

“We cannot continue to run a business with a cash balance that’s expected to be zero,” Corbett said, noting that would happen at the start of what’s historically the service’s strongest quarter. “We need to put ourselves on solid financial footing.”

The service, which must by law pay $11.1 billion for future health benefits by the Sept. 30 end of its fiscal year, said it won’t have the cash to make this year’s payment or last year’s overdue one.

The quarterly loss widened from $2.2 billion a year earlier as mail volume slid further, the service said in a statement.

The 10th consecutive quarter of losses may spur the U.S. House to consider its version of legislation intended to overhaul the service, which is supposed to be self-sufficient. The Senate has passed a bill that didn’t give the service all the changes it requested, including permission to end Saturday delivery.

The service, as of March 31, had $2 billion remaining in borrowing authority, Corbett said. Allowed to only borrow from the U.S. Treasury, the Postal Service has a debt limit of $15 billion.

“The Postal Service can’t afford to continue hemorrhaging money like this,” Senator Tom Carper, a Delaware Democrat who co-sponsored the Senate bill, said in an e-mailed statement. “Congress can’t stand idly by and allow it to continue to creep towards collapse. The Postal Service supports a trillion-dollar mailing industry and over 8 million jobs.”

Rep. Darrell Issa, a California Republican who is co-sponsoring the House proposal, said the report shows the seriousness of the Postal Service’s situation.

“The USPS needs responsible legislative action to restore long-term solvency, preserve delivery of mail, and protect taxpayers from footing the bill for a bailout,” he said in an e-mailed statement.

The Postal Service, which lost $3.3 billion in its first quarter, had forecast a record $14.1 billion loss for this fiscal year including last year’s retiree health benefit payment. That compares with a $14.6 billion loss in 2008 for Ford Motor Co., the only one of the three biggest U.S. automakers to not receive a U.S. government bailout.

“We are aggressively pursuing new revenue streams and reducing costs in areas within our control,” Postmaster General Patrick Donahoe said in the statement. “These actions are not enough to return the Postal Service to profitability.”

The service wants to eliminate as many as 220,000 jobs and close mail-processing plants to reduce costs. It said yesterday it can save $500 million annually by cutting hours of operation at as many as 13,000 small-town post offices.

That strategy was a reversal from a plan announced last year to close as many as 12 percent of post offices to save $200 million annually. Congress members including Scott Brown, a Massachusetts Republican, and Carper had asked the service to keep post offices open.

In the second quarter, the service cut its expenses by $400 million to $34.1 billion as it pared work hours. Labor cost cuts were offset by increases in fuel and benefits costs.

Mail volume, which has slid since peaking in 2006, fell 4.1 percent in the quarter as operating revenue declined 1 percent to $16.2 billion.

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Thursday, 10 May 2012 10:19 PM
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