The U.S. Postal Service Nears Collapse

http://www.businessweek.com/magaz...885070.htm

Phillip Herr looks like many of the men who toil deep within the federal government. He wears blue suits. He keeps his graying hair and mustache neatly trimmed. He has an inoffensively earnest manner. He also has heavy bags under his eyes, which testify to the long hours he spends scrutinizing federal spending for the U.S. Government Accountability Office, the congressional watchdog agency where he is Director of Physical Infrastructure Issues. As his title suggests, Herr devotes much of his time to highway programs. But for the past three years he has been diagnosing what ails the U.S. Postal Service.

Since 2007 the USPS has been unable to cover its annual budget, 80 percent of which goes to salaries and benefits. In contrast, 43 percent of FedEx's (FDX) budget and 61 percent of United Parcel Service's (UPS) pay go to employee-related expenses. Perhaps it's not surprising that the postal service's two primary rivals are more nimble. According to SJ Consulting Group, the USPS has more than a 15 percent share of the American express and ground-shipping market. FedEx has 32 percent, UPS 53 percent.

The USPS has stayed afloat by borrowing $12 billion from the U.S. Treasury. This year it will reach its statutory debt limit. After that, insolvency looms.



And so it ends. Postal service unions have gotten their way towards lavish pension and benefits in the past. Hence, collapse.

Quote from Krazen1211 : http://www.businessweek.com/magaz...885070.htm Phillip Herr looks like many of the men who toil deep within the federal government. He wears blue suits. He keeps his graying hair and mustache neatly trimmed. He has an inoffensively earnest manner. He also has heavy bags under his eyes, which testify to the long hours he spends scrutinizing federal spending for the U.S. Government Accountability Office, the congressional watchdog agency where he is Director of Physical Infrastructure Issues. As his title suggests, Herr devotes much of his time to highway programs. But for the past three years he has been diagnosing what ails the U.S. Postal Service. Since 2007 the USPS has been unable to cover its annual budget, 80 percent of which goes to salaries and benefits. In contrast, 43 percent of FedEx's (FDX) budget and 61 percent of United Parcel Service's (UPS) pay go to employee-related expenses. Perhaps it's not surprising that the postal service's two primary rivals are more nimble. According to SJ Consulting Group, the USPS has more than a 15 percent share of the American express and ground-shipping market. FedEx has 32 percent, UPS 53 percent. The USPS has stayed afloat by borrowing $12 billion from the U.S. Treasury. This year it will reach its statutory debt limit. After that, insolvency looms. And so it ends. Postal service unions have gotten their way towards lavish pension and benefits in the past. Hence, collapse.

Congress will just bail it out to whatever degree the public unions "need."

Buy forever stamps.

I'm sure it won't take long for this thread to devolve into a political firestorm about public sector vs private sector postal service. But please keep in mind that FedEx, UPS, and the USPS are NOT interchangeable services and they don't perform in the same sectors of the market.

Personally, I do my best to live a 'paperless' lifestyle and I would love to receive no mail except what I specifically request (like packages and Netflix) - no paper bills, no catalogs, and no junk mail. But many folks and services do rely on paper bills and such. Without cheap reliable mail service, many businesses simply can't operate effectively. FedEx won't deliver a letter across the country for 44 cents. They wouldn't drive to every singe mailbox in the country to pick up and deliver mail because it isn't very profitable. That's great for them - they can focus on the higher-profit business sector of the delivery market. But if we as a society continue to expect near-daily mail service, we can't expect USPS to be as profitable as those who only service the most profitable sectors. Not to mention that by syphoning off the high-profit packages, services like FedEx and UPS drive down the revenue of USPS without lowering their costs (since they still have to service every customer, every day).

That being said, I do quite a bit of shipping for Amazon and eBay sales, and the costs of shipping don't even compare. Even with the recent price hikes, USPS is far cheaper for shipping domestically. For example, to do next day shipping of a small 3 lb package, USPS was charging $37 and FedEx was $112! I'm sure FedEx works great for Amazon and other large-volume businesses, but doesn't work so well for average folks like me.

So again, this isn't a criticism of FedEx or other private sector delivery services. They are just doing what works for them. But don't pretend that they are inherently 'better' that USPS because their responsibilities simply don't compare. Unless we stop requiring near-daily mail service at our homes, we should be slow to criticize USPS for being un-profitable. I'm not letting them off the hook, but for now, I'll cut them some slack.

Quote from JOHNLAW : Buy forever stamps.

Nah, FedEx and UPS won't honor them for too long after they each buy chunks of the USPS at auction.......

Quote from ShengD : I'm sure it won't take long for this thread to devolve into a political firestorm about public sector vs private sector postal service. But please keep in mind that FedEx, UPS, and the USPS are NOT interchangeable services and they don't perform in the same sectors of the market. Personally, I do my best to live a 'paperless' lifestyle and I would love to receive no mail except what I specifically request (like packages and Netflix) - no paper bills, no catalogs, and no junk mail. But many folks and services do rely on paper bills and such. Without cheap reliable mail service, many businesses simply can't operate effectively. FedEx won't deliver a letter across the country for 44 cents. They wouldn't drive to every singe mailbox in the country to pick up and deliver mail because it isn't very profitable. That's great for them - they can focus on the higher-profit business sector of the delivery market. But if we as a society continue to expect near-daily mail service, we can't expect USPS to be as profitable as those who only service the most profitable sectors. Not to mention that by syphoning off the high-profit packages, services like FedEx and UPS drive down the revenue of USPS without lowering their costs (since they still have to service every customer, every day). That being said, I do quite a bit of shipping for Amazon and eBay sales, and the costs of shipping don't even compare. Even with the recent price hikes, USPS is far cheaper for shipping domestically. For example, to do next day shipping of a small 3 lb package, USPS was charging $37 and FedEx was $112! I'm sure FedEx works great for Amazon and other large-volume businesses, but doesn't work so well for average folks like me. So again, this isn't a criticism of FedEx or other private sector delivery services. They are just doing what works for them. But don't pretend that they are inherently 'better' that USPS because their responsibilities simply don't compare. Unless we stop requiring near-daily mail service at our homes, we should be slow to criticize USPS for being un-profitable. I'm not letting them off the hook, but for now, I'll cut them some slack.

I agree on this. Fedex and UPS are great for heavy packages, but terrible for small ones. I don't know what exactly the minimum is, but it seems that for delivering to a residence, UPS and Fedex Ground are never cheaper than $9 or so. Considering that UPS first class is $3 or less even for packages, and priority mail for a 1 pound package is ~$5 to anywhere, and gets there in only 2-3 days, UPS and Fedex both suck for small packages and for shipments cross-country.

Quote from Krazen1211 : = And so it ends. Postal service unions have gotten their way towards lavish pension and benefits in the past. Hence, collapse.

You do realize that the USPS doesn't get that great of health benefits, not compared to some plans and most don't even get pensions and are on more of a 401k TSP plan that doesn't even include matching?

Quote from The2AMBearArms : I agree on this. Fedex and UPS are great for heavy packages, but terrible for small ones. I don't know what exactly the minimum is, but it seems that for delivering to a residence, UPS and Fedex Ground are never cheaper than $9 or so. Considering that UPS first class is $3 or less even for packages, and priority mail for a 1 pound package is ~$5 to anywhere, and gets there in only 2-3 days, UPS and Fedex both suck for small packages and for shipments cross-country.

The price difference explains why USPS is always running in the red and FedEx/UPS always make profits, among other factors of course........

If the USPS didn't have a monopoly on your mailbox things would be very different.

I don't know about you but 85% of what we get from the USPS is junk, 0% of what we get from FedEx/UPS is junk...... I get less spam (as a percent of total received) in my back-up "junk" email account than I do in my mailbox at home

of course the OP forgot the following .... while pushing his union hate..

The USPS employs more then both UPS and FEDEX combined......

and second, UPS and FEDEX have been known to use USPS cheap rates while they get away with charging their customers twice that..

You know that FEDEX overnight letter, it is all handled within USPS systems before it gets to its final destination... OP obviously haven't gotten overnight shipment from FEDEX that strangely had USPS markings on it.. or Amazon products that ships via UPS but ends up getting delivered by USPS...

In fact both UPS and FEDEX utilize USPS systems to save themselves money making both those company filthy rich...

wow 80% to salaries and benefits. Note that that # does NOT include overhead like paying for electricity and GASOLINE.

If it weren't for laws dictating that the commercial carriers can't be postmen (e.g. letter carriers) I wonder what would happen.

Quote from Ryu-bom : of course the OP forgot the following .... while pushing his union hate.. The USPS employs more then both UPS and FEDEX combined...... and second, UPS and FEDEX have been known to use USPS cheap rates while they get away with charging their customers twice that.. You know that FEDEX overnight letter, it is all handled within USPS systems before it gets to its final destination... OP obviously haven't gotten overnight shipment from FEDEX that strangely had USPS markings on it.. or Amazon products that ships via UPS but ends up getting delivered by USPS... In fact both UPS and FEDEX utilize USPS systems to save themselves money making both those company filthy rich...

Do you honestly think that fedex and ups are screwing the usps with COOPERATIVE shipping? This has been going on for some time. UPS/fedex do the major hauls and the mail carrier brings the package to the customer's door on their daily route. Obviously ups/fedex and the usps have an agreement for the fees involved.

It it wasn't for gettin & returnin netflix blu-rays, I'd never use the usps for squat

Quote from Count_Chocula : It it wasn't for gettin & returnin netflix blu-rays, I'd never use the usps for squat

which reminds me....... I've had 3 netflix movies "get lost" on their way back to the mothership, out of perhaps 10.

Quote from Dr. J : which reminds me....... I've had 3 netflix movies "get lost" on their way back to the mothership, out of perhaps 10.

that blows, i'm still battin 1000. don't understand why the lame ass return site is in baton rouge instead of new orleans though?

Quote from Ryu-bom : of course the OP forgot the following .... while pushing his union hate.. The USPS employs more then both UPS and FEDEX combined......

Is that a good thing or perhaps the reason why it's losing money?

How about the fact their union agreement states they can't lay anyone off?