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Marvin Runyon, the postmaster general since 1992, retired last week. He talked with Paul Solman about his tenure and the future of the nation's postal service.

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LEE HOCHBERG: Marvin Runyon served as an auto executive with Ford an Nissan and chairman of the Tennessee Valley Authority before taking the postmaster job in 1992. He inherited an agency billions of dollars in debt. Under his watch the postal service modernized first class delivery, adding labor-saving machines like this optical character reader in Portland, Oregon. The machine reads envelope addresses as they fly by, 34,000 per hour, and automatically sorts them for delivery. A job that once took 18 employees now requires only 2. Addresses the machine can't read it takes a picture of and transmits to postal employees at computer terminals in Salt Lake City. They read the address, transmit it back to Portland, and letters are ready for delivery. The Portland Post Office says it's processing more mail than ever with 5 percent fewer employees. Nationwide, the postal service has trimmed staff by 23,000, helping it to record profits of $4 billion over the last three years.

SPOKESMAN: Fed Ex can deliver in two days for up to $11. UPS can deliver in two days for up to $11.

SPOKESPERSON: Priority Mail can deliver in two to three days for $3.

LEE HOCHBERG: The Post Office under Runyon spent $266 million last year to market itself, and has tried to improve customer service. It added new hours to accommodate working parents and began accepting credit cards. But it also raised the price of a first class stamp 4 cents in three years to cover what it says are increased material and labor costs. And critics say Runyon's push to streamline operations and cut costs has been hard on workers. Union leaders report a record number of grievances. Jim Cook heads the Portland branch of the Letter Carriers Union:

JIM COOK, Letter Carriers Union: We don't see it as being a kinder, gentler, Postal Service. In fact, it has not been too concerned about human relations in the Postal Service. It's been a numbers game. And we respect that, that that's the businessman's way.

LEE HOCHBERG: And Runyon's aggressive efforts in the package business have angered top national shippers. Concerned that financial mail, one half of the Postal Service's first class business, will soon be replaced by electronic bill payment, the Postal Service spent millions of dollars expanding its Priority and Express Mail services. Federal Express and UPS cried "foul." UPS Chairman James Kelly.

JIM KELLY, United Parcel Service: (April 14) UPS is going head to head with the Postal Service to expose them for what they really are-an anti-competitive, anti-free enterprise government bureaucracy that wouldn't last one day in the free and open market of real competition.

LEE HOCHBERG: UPS is supporting a bill pending in a House subcommittee to privatize some functions of the Postal Service. Runyon answers that when workers at the privately-held UPS went on strike last year, the Postal Service stepped into the breach. A competitive Post Office, he says, is the best benefit to consumers.

JIM LEHRER: Marvin Runyon's last day on the job was last Friday, when our business correspondent Paul Solman of WGBH-Boston talked with him.

PAUL SOLMAN: And with me now, Marvin Runyon. Mr. Runyon, welcome.

MARVIN RUNYON, Former Postmaster General: How are you, Paul?

PAUL SOLMAN: If you're making money now, why raise the price of a stamp by 3 percent-a penny?

MARVIN RUNYON: Well, the first thing we're raising money for is to pay back the debts. When I came to work at the Postal Service six years ago we had $6 billion of negative equity.

PAUL SOLMAN: Negative equity meaning-

MARVIN RUNYON: Negative equity meaning that we owed-we'd be bankrupt if we were a private business. Nobody has negative equity. You don't stay in business with negative equity. But the Postal Service can, because it's a government agency.

PAUL SOLMAN: Right.

MARVIN RUNYON: So we're paying that back. And we've got $4.6 billion that we paid back in the last three years, and we're about a billion four ahead right now. And some of that will go down because we're into some months where we don't make money. And we get close to paying that negative equity off. Now, there's another reason also. We plan to spend $17 billion in the next five years to improve service, improve our facilities, and improve the quality of our work. So we really need that money.

PAUL SOLMAN: How come you're making it now as a private or semi-private company, the Postal Service? I mean, what did your predecessors not do that you did?

MARVIN RUNYON: Well, I know what I did. When I came in, I pointed out to all of our employees that we have customers. That's the only reason that we're in business, and that's to provide service for our customers. And we've looked at ways to do that, and we're doing it. And we're looking at the operations. We've put in automation programs. We need to put in more. That's what the $17 billion is all about and the one penny that we're talking about.

PAUL SOLMAN: The investment you're going to make.

MARVIN RUNYON: Yes. We need to have more automation. We're getting very automated now. We're getting to the point that in two years we'll be able to know where every letter is any point in the process, and that's getting to the point that's very good, and by the year 2020, I predict that we'll have plants that operate lights out. That means machines will completely process the mail for us.

PAUL SOLMAN: Have you exploited postal workers in the process? I was watching the final Seinfeld, of course, and Newman, a postal worker, has a loud lament about his lowly fate.

MARVIN RUNYON: No, we haven't exploited the postal workers in any way. We've made their job easier. You know, when you put in conveyers that are-automated conveyers and put in robots that actually move the mail for you-when you don't have to bend over and get mail and reach up and get mail and you can just move it, you know, at waste level, this makes it easier. So we're doing all the kind of things we can to make the job easier for our employees.

PAUL SOLMAN: Okay. There's been a gradual privatization of the Postal Service. Why not, as some in Congress propose, simply go all the way?

MARVIN RUNYON: Well, we are pretty well privatized, as you say. All of our mail is flown in private planes. All of our mail is trucked from city to city in private trucks. We lease 80 percent of our facilities, so they're privately owned. But you will never-I don't believe-go totally privatized. First thing-that would eliminate the universal service at a uniform price.

PAUL SOLMAN: And you mean by that what?

MARVIN RUNYON: I mean by that for 32 cents today you can send a letter from Hawaii to Puerto Rico. And if you didn't have a universal service at a universal price, no telling what the price of mail will be.

PAUL SOLMAN: Well, why?

MARVIN RUNYON: Well, it's very important because-

PAUL SOLMAN: I mean why would you not be able to tell what the price would be? Why wouldn't you be able to deliver it for 32 cents to Hawaii?

MARVIN RUNYON: You mean a private contractor?

PAUL SOLMAN: Yes.

MARVIN RUNYON: Well, they could but they wouldn't.

PAUL SOLMAN: Because?

MARVIN RUNYON: Because if all they did was deliver mail from Hawaii to Puerto Rico, the price of that might be $6. That's what they might charge you. You see, if we privatized it totally, what would happen is people in Washington would say, oh, hey, I will deliver the mail in Washington, and I'll do it for 20 cents. Now, I'm not going to deliver it everywhere in Washington. There are some places we won't go into because we don't need that. And, oh, by the way-

PAUL SOLMAN: Look, the pizza problem a few years ago-where the pizza companies say certain areas are too dangerous, we're just not going into them.

MARVIN RUNYON: Right. Businesses do that every now and then. The Postal Service never does that. Or, then they say, well, wait a minute, I got a letter I want to send to Chicago. Oh, we can take it to Chicago for you; it costs $2.72. You see, so when you get into privatizing, you have to think about all of that stuff, plus there are very few private companies out there that will provide a universal service at a uniform price all over the country six times a week.

PAUL SOLMAN: So that's what we're buying for the monopoly that you've got on certain-

MARVIN RUNYON: A monopoly on first class mail, that's right.

PAUL SOLMAN: Okay. So now you've really antagonized some of your rivals-UPS most specifically-as we've seen-by the so-called unfair advantages that they say you have, this monopoly. For one, you don't pay taxes; you can borrow at the government rate, which is lower than any private company possibly can-you're exempt from government regulations, like OSHA, and so forth-not a fair charge, you're not cheating, as UPS says?

MARVIN RUNYON: No, not a fair charge. The first thing-so we don't pay taxes. I didn't check the other day. I said, look, we made $4.6 billion. If we were a private company, how much taxes would we have paid? Well, we went back and looked at that, and they said, none, not one penny, because of the loss carry forward you have. I mean, that's the way businesses work.

PAUL SOLMAN: Okay. That's because of the past-

MARVIN RUNYON: Right.

PAUL SOLMAN: In the future, you would have to pay taxes.

MARVIN RUNYON: We wouldn't be making a profit. We're supposed to be a break-even company. Now what we're trying to do is get even. We're trying to make up for the losses we've had, so we're trying to get even. We get the losses gone and get to be break-even, then maybe we don't have to ever go up on stamp prices.

PAUL SOLMAN: What about exemption from regulations and lower borrowing costs, those are-

MARVIN RUNYON: We don't have lower borrowing costs. Our borrowing costs are higher. When I ran the Tennessee Valley Authority-and I've tried to do it here-haven't been able to do it here-but at Tennessee Valley Authority we got out of a federal financing bank, because they had so many restrictions on how you could borrow that it cost me more money. By bidding out of there, we saved $200 million a year.

PAUL SOLMAN: Hidden costs, you mean?

MARVIN RUNYON: Yes. And we could do that at the Postal Service if we didn't have to go to the Treasury to borrow money. We don't want to do that.

PAUL SOLMAN: So why go head to head against UPS? Why do the kind of advertising we've just seen and antagonize them as you have?

MARVIN RUNYON: We're not trying to antagonize anybody.

PAUL SOLMAN: Well, why did you-

MARVIN RUNYON: We have customers. Oh, I don't know, maybe their price is too high. We have customers, and we're only pointing out to our customers, hey, you want the best price, the best product, the best value-that's your prerogative.

PAUL SOLMAN: What's the Postal Service going to look like in the future? I mean, what's it going to be like say, I don't know, 10 years from now? Are you going to be able to survive is I guess really my point? And electronic mail coming in, UPS going after you and so forth, maybe you're just obsolete, or will be?

MARVIN RUNYON: Absolutely not. We're going to be surviving. You know, that obsolete story, that's been going on for years and years and years. Remember when telegraph came in-no, you don't-you weren't around, but when telegraph came in-

PAUL SOLMAN: You were around when telegraph came in?

MARVIN RUNYON: When telegraph came in, people said that's the end of the mail. This telegraph works too good-end of the mail. Mail doubled 1300 percent in 12 years. And then the telephone came in. Oh, why would people write letters when they can pick up a phone and call? Then the mail just continued to grow. And then 20 years ago Congress said we want a study made of if the mail is going to continue to grow. Twenty years ago the report to Congress said at the end of twenty years the Postal Service is probably going to be out of business. We've doubled since then. Now, we've lost $6 billion worth of business in the last five years in first class mail. That monopoly stuff you're talking about-we've lost $6 billion worth. How did we do it? Fax; e-mail; electronic data; transfer.

PAUL SOLMAN: So then you're finished?

MARVIN RUNYON: So our first class mail has been dropping.

PAUL SOLMAN: Right.

MARVIN RUNYON: But a lot of our mail is increasing. Parcels are increasing.

PAUL SOLMAN: And that's why you're up against UPS, and so forth.

MARVIN RUNYON: Well, you know, the Postal Service used to have all the parcels, all the parcels, all the Express Mail. Now then UPS has a virtual monopoly-83 percent of the parcels in this country are shipped by UPS-7 percent by the Postal Service, up from 5.

PAUL SOLMAN: Well, I think we could keep going and get you going-but we've run out of time. Anyway, Marvin Runyon, thank you very much.

MARVIN RUNYON: Thank you.

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