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Tags: Postal | Problems | loss | billions

Postal Service Loses $3.3 Billion, Warns of Cash Drain

Thursday, 09 February 2012 10:16 AM EST

The U.S. Postal Service said it lost $3.3 billion in the quarter ended Dec. 31 — typically its strongest — and that it expects to run out of cash in October unless Congress agrees to cuts in facilities and employees.

“If the Postal Service is unable to reduce its operating costs by $20 billion a year by 2015, we may not be able to return to profitability,” Postmaster General Patrick Donahoe said at a board meeting in Washington today. “We may become a long-term burden to the taxpayers if we are not able to make these reductions quickly.”

The ninth consecutive quarter of losses may increase pressure on Congress from the Postal Service and customers to approve legislation intended to return it to solvency.

“We have a Postal Service that essentially is living from paycheck to paycheck, which is a very risky proposition for the American economy and the 8 million private-sector workers whose jobs rely on the mail,” Art Sackler, coordinator of the Coalition for a 21st Century Postal Service, said in an e-mail. “Each day Congress fails to enact postal reform, this problem grows more difficult and perhaps more expensive to resolve.”

The coalition’s members include Bank of America Corp. (BAC) and FedEx Corp. (FDX)

Cash Projections

The Postal Service, which doesn’t receive U.S. taxpayer funding, last year reached its $15 billion borrowing limit from the U.S. Treasury and has forecast a record $14.1 billion loss for this fiscal year. The service wants to eliminate as many as 220,000 jobs and close as much as 12 percent of its post offices, among other changes.

The loss for the period that includes the Christmas season widened from $329 million in the year-earlier period. Revenue fell 1.1 percent to $17.7 billion as mail volume declined 6 percent, Chief Financial Officer Joseph Corbett told the board.

The service’s daily operating costs are $220 million, or $1.3 billion for a six-day work week. Cash on hand will fall below one week’s expenses by August and run out, without help from Congress, after it makes a workers-compensation payment to the U.S. Labor Department in October, Corbett said.

The cash position would temporarily improve after October and then run out again by October 2013, according to a presentation at the meeting.

The Postal Service predicted in November the amount of mail it will deliver in fiscal 2012 will fall about 6 percent, exceeding the drop of about 2 percent a year earlier, for a decline of more than 20 percent in the past five years. Revenue will probably decline to $64 billion in the year ending Sept. 30 from $65.7 billion in 2011, Corbett said at the time.

© Copyright 2023 Bloomberg News. All rights reserved.

Thursday, 09 February 2012 10:16 AM
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