Postal Problems

LEE HOCHBERG:

Last month's announcement that the U.S. Postal Service wants to raise the price of stamps three to five cents and possibly end the Saturday service read like a horror story at Powell's bookstore in Portland. A top Internet seller of used books, Powell's ships 800 priority mail packages a day, and says it needs Saturday pickup to stay competitive.

JANE WELLS:

We need to move packages out of here every single day. We want pickups and deliveries seven days a week. So I think it's unfortunate to see that they're going backwards.

LEE HOCHBERG:

Powell's took some of its business to other carriers after the postal service's last rate increase in January, which was 16% on some mail. Shipping manager Jane Wells says the proposed new hike could make Powell's rethink its reliance on the post office.

JANE WELLS:

We would almost be forced, in order to keep our business going, to send things by other means.

LEE HOCHBERG:

The Postal Service says it needs another hike because it faces a potential loss of $2 billion to $3 billion this year. The dire prediction came out of nowhere. The agency ran in the black in the late 1990s, and as late as last September, protected a surplus of $150 million for this fiscal year. But it now says labor and utility costs are up, and fuel expenses for mail trucks will be $350 million more than it expected. Add to that the fact that first-class mail, more than half the agency's revenue base, has stagnated.

WILLIAM HENDERSON:

For the first time in our history, advertising mail outpaced first-class mail. Now, what does that mean? Well, it means that instead of delivering most of your mail as first-class to your house at 34 cents apiece, we're delivering mail at 17 cents apiece. So the actual revenue per piece of mail, if you take the entire volume of the Postal Service, is going down.

LEE HOCHBERG:

Postmaster General William Henderson says the last months' slower economy means not enough people sending mail or buying stamps.

WILLIAM HENDERSON:

We have horrible demand for mail, and it has just whacked us. I mean, we are really… We're really hurting for revenue.

LEE HOCHBERG:

Competition from United Parcel Service and Federal Express has hurt. The post office says electronic communication has hurt too– not so much casual e-mails, but electronic billings and payments. Last year, for example, the Social Security Administration transferred more than 500 million electronic payments directly into recipients' bank accounts. Only one out of four Social Security checks still goes by letter mail. And consumers, like many getting these bills from Portland General Electric, are opting to pay electronically.

NANCY MILLER:

We've got about 20,000 people that are sending us Internet payments. We also have about 10% of our customers who are on automatic debit. It really has affected the checks coming in in the mail.

LEE HOCHBERG:

But critics say the economy and e-mail are only aggravating what's really a much deeper problem with the Postal Service.

RICK MERRITT, Postal Watch:

Here we have an organization that is massively bloated, has institutionalized, systemic problems relative to waste, fraud, mismanagement, and can't even break even when it has a monopoly.

LEE HOCHBERG:

Rick Merritt heads the Florida-based citizens' group Postal Watch. Its Web page blasts the Postal Service for increasing productivity only 11% in 30 years, far below private sector companies. It points to recent reports from the General Accounting Office and the Postal Service's own Inspector General outlining $1.4 billion of agency waste, fraud, and abuse over the last four years.

RICK MERRITT:

This reads like Harvard Business School's guide of what not to do when you're trying to run a business.

LEE HOCHBERG:

The Inspector General's Office says the Post Office paid for chauffeur- driven limos and town cars for postal managers' personal use. It details $467 million in fraud and waste in procurement programs. It notes the Postal Service paid managers $325 million in performance bonuses last year, though the agency already was running in the red. And it documents payments $250,000 to move two postal executives to new homes, though the homes were only 20 miles from where they originally lived. Postmaster Henderson defends those payments as necessary to keep good managers.

WILLIAM HENDERSON:

Relocation benefits, while they were large, were completely within our regulations, completely within our policy.

LEE HOCHBERG:

Critics say even if the agency reduces waste, it will continue to run deficits until it reduces its payroll. The Postal Service has a workforce of more than 800,000. Labor costs eat up 76% of revenues, far more than at competing UPS or Federal Express.

RICK BUSINESS:

Their problem is that they've hired 238,000 workers since 1980. What they need to do is have a hard, enforced, predefined, long-term freeze on hiring, and that will basically solve e majority of their economic problems.

LEE HOCHBERG:

The Post Office does plan to trim labor costs over the next five years but says it can't freeze hiring because it's required by law to keep staffing 26,000 unprofitable post offices. And it can't lay off letter carriers either because there are two million additional addresses each year to which letters need to be delivered. Portland-area letter carrier Jim McEntire:

JIM McENTIRE, Letter Carrier:

A year and a half ago, this was a field. So as far as staying busy, I'm busy, sometimes more busy than normal, because of the growth.

LEE HOCHBERG:

The agency is trying to be more entrepreneurial. It began selling advertising space on mail trucks and mailboxes in February. And it's trying to advertise itself too.

SPOKESMAN:

…The qualities that won Lance Armstrong the Tour de France. Now, they're available in international delivery.

LEE HOCHBERG:

It sponsored the U.S. Olympic bicycling team to promote Postal Service overseas delivery.

SPOKESMAN:

Now you'll know which team to ride with.

WILLIAM HENDERSON:

Lance Armstrong is a huge success for the Postal Service, on many fronts. The reason initially that we put together this team was for branding in Europe, and it's done a terrific job of branding the United States Postal Service in Europe.

LEE HOCHBERG:

The agency says it ma $9 million last year on postal service product lines, things life Looney Toons key chains and pens; sweatshirts and bike team fanny packs. And it hopes to begin profiting from the e-mail business. Already it offers stamps and bill payments online through its Web site, and recently it introduced a new electronic postmark that marks a verifiable time and date on e-mail messages.

SPOKESMAN:

U.S.P.S. Electronic postmarks bring the trust, security, and power of the Postal Service's brand to the field of electronic communications.

LEE HOCHBERG:

But its detractors urge the post office to stop dabbling in the Internet and focus on its core goal, delivering traditional mail.

RICK MERRITT:

What in the world makes us thank that they can go out and compete with some dot-com company that's got a workforce that's willing to sleep under their desk 24 hours a day to program? They won't be successful at it any more than they had been successful at their previous ones.

WILLIAM HENDERSON:

Unfortunately our hands are tied when it comes to some types of innovation. We can't change our prices in response to market changes.

LEE HOCHBERG:

In an address in March to Post Office customers in Florida, Postmaster Henderson said the best way to improve the Postal Service's finances is to free it of congressional oversight. The agency wants to operate more like a business– changing prices quickly, maybe offering bargain-priced stamps in the slow summer mailing season, but raising prices at Christmastime, or offering volume discounts to large mailers. Under the 1970 Postal Reform Bill, it's unable to do those things now.

WILLIAM HENDERSON:

If we were a car dealership and we had no pricing freedoms, we would be the least competitive in that market. And today what you're looking at is a competitive enterprise with no price increase.

LEE HOCHBERG:

At a congressional hearing in March, House members were skeptical about such reform.

REP. BOB BARR:

I think there is just so much room for improvement in other areas; why you would bite off that at the beginning of this exercise is something I don't quite understand. I would urge you all to move that off of the table.

LEE HOCHBERG:

Some suggest the threat to end Saturday service is just a tactic to force Congress to give the Post Office a longer leash. But Henderson insists the agency's economic slowdown is real.

WILLIAM HENDERSON:

It doesn't help our brand– we're a competitor out there– to forecast losses. N I mean, that's not… That's not a fun thing to do for us. This is not a trick.

LEE HOCHBERG:

The Senate Governmental Affairs Committee will hold a hearing on the postal service's finances on may 15. A decision on a rate increase could be considered by July.