USPS-$5bil Loss, CanadaPost- $433mil Profit

[votrechien]

It's outrageous.

USPS just reported a $5bil + annual loss: [money.cnn.com...]

Canada Post in August reported its highest profits ever - nearly half a billion (for a country with 10% the population of the US) [cupw.ca...]

Clearly declining mail volumes is not the sole cause of the problem. And while labor contracts might be partly to blame anyone who ever uses USPS knows how prehistoric many of their systems are. I cringe every time it costs me the same amount of money to send a package from Blaine, WA to Surrey, BC (about 5kms apart) as it does from Blaine, WA to Toronto, ON (about 5000kms apart).

[Planet13]

I think that a big part of the loss is due to the pre-funding of retirement pensions, which was mandated by congress.

Having said that, yes, the USPS does need to do so serious reorganizing.

[dpd1]

And while labor contracts might be partly to blame anyone who ever uses USPS knows how prehistoric many of their systems are.

How are you supposed to upgrade stuff when you don't have any money?

My prediction... Congress will drive them right into complete dysfunction. Then when the public gets sick of dealing with it, they'll have a knee-jerk reaction... fully privatize it... then whoever takes over will double the fees for stuff that the majority of citizens don't care about, like international packages... and expect the business people to pick up the slack. Like always. Then granny will still be able to have her cheap stamps and quit writing her congressman, and they'll get the whole thing out of their hair. This has been their ongoing formula with the military and a host of other things for a long time now... so why would this be any different.

Like most things in the US now, this is another one of those deals where the public wants top service, but they don't want to pay for it.

[HRoth]

I think you are exactly right, dpd1. Our ruling class has to suck every single dime out of this country before they move on to China and India and Brazil.

What do we need international post for anyhow? Only commies and terrorists mail stuff to other countries.

[jwolthuis]

It's easy to see why they lose money. Just observe the lobby of any post office, and do the math: Clerk behind the counter is probably earning $20/hr plus vacation, health care, and pension. Round it off to 50-cents per minute.

Granny spends 5 minutes of face-time with the clerk, trying to figure out if Junior will get his birthday card by Friday, and chatting about the weather, and did you hear about the new boutique across town, and blah, blah, blah.

Total sale: a couple stamps. Total labor cost: $2.50.

They should start their modernization by charging $1/transaction for window-service. Let Granny use the APC if she doesn't like it.

[not2easy]

The USPS's major fail was not aggressively marketing their services and/or marketing them without targeting. If you live on the mainland, businesses offer free shipping (via UPS), but for AK, HI et al only 2nd Day Air is available because companies hooked their carts into UPS' API unaware that the USPS offers API for their services too. Imagine the disincentive of paying $22 shipping to order a pair of socks online if you live in Alaska when the USPS could have shipped it First Class for $1.25. USPS is far more cost effective for many business shipping situations, they even provide free packaging - but UPS' targeted marketing got them sole provider status with many businesses, a huge disservice to millions of customers. Now even USPS is a UPS customer.

[Rugles]

It's easy to see why they lose money. Just observe the lobby of any post office, and do the math: Clerk behind the counter is probably earning $20/hr plus vacation, health care, and pension. Round it off to 50-cents per minute.

Do you not realize that Canada Post employees get the same amount of wages and benefits? Of course they do.

Here is the actual problem. Americans get too much service for too small a price.

Examples:

- Sending a 2 pound parcel in Canada with the postal service across the nation is about the same price as using a courier service, in fact often it costs more. Do the same thing in the US and put it in their free box (no free boxes in Canada I might add) and you can do it for less than 5 bucks.

- No Saturday deliveries in Canada

- all new homes over the last 20 years do not get letter delivery to your front door. They put up a large box (like the PO boxes you see in the post office) in the middle of a subdivision and everybody in the nieghbourhood has to go there each day to pick up their own mail.

So Americans are used to a higher level of service at a much lower price. So of course they are running a huge deficit in the US and turning a profit in Canada. Blaming it on employees is unfair IMO.

[jwolthuis]

... because companies hooked their carts into UPS' API unaware that the USPS offers API for their services too.

So, postal problems are because of naive programmers?

... when the USPS could have shipped it First Class for $1.25.

That rate is due to regulation by the PRC, not because USPS is 20-times more efficient than UPS or FedEx to AK and HI. USPS loses money on that shipment.

[dpd1]

It's true that in some ways the service levels are higher than the money they are taking in. But there is also a lot of denial going on with many of the employees. In other words... Many of them just don't get it. My postal guy just had a 4 week vacation. What other kind of job like that allows 4 week vacations? In many offices, the mentality of many workers is that... we're working for THEM... Not the other way around. I stopped going to my closest PO for drop, because I got sick of them nagging me about something every time I walked in. I was giving them thousands a year, and they treated me like a pariah. And it's an underused office, so I would bet they are pretty high on the close list. Yet, the people working there remain clueless. But you also have hard workers too. One lady who did my route while the other guy was on vacation, told me they sent her over to pickup my stuff, but she still had 1/4 truck left to deliver, and they were telling her that they want everybody punched out by 3pm on Saturdays. So the route workers are feeling the pressure too.

So it's a little bit of everything. Congress has handcuffed them, and a lot of the workers aren't exactly getting it. But when you consider how much money flies out of the fed each year, I don't think throwing some money at a vital service for our country is going to make much of a difference at this point. They need to let them get out of labor deals that are higher than standard, and do some of the other things that can help them get back into profit. I would much rather live without Saturday service, than doubled package fees. There's no way a completely privatized service would let the current rates remain. I am only able to sell internationally because of those rates. Take that away, and I am down 1/3 my income. Simple as that. And I'm sure there's others in the same boat. The fed is always looking for silly things to throw money at to "create jobs". This is one thing that actually matters.

[votrechien]

As Rugles mentioned, Canada Post workers make excellent money so wages and email aren't the determinate causes of USPS' woes IMO.

Also as Rugles mentioned, the level of service someone gets with USPS goes well beyond what their paying. IMO, it's more of a revenue than expense problem.

For example, yesterday I mailed a small stainless steel part, weighing about 6ozes, via Canada Post to an address about 200kms away. It cost me $12. According to USPS I could ship that item for about $2.50 with them a comparable distance. I had no better choice though. The Canada Post rates are comparable or marginally cheaper than UPS/FedEx and I needed to mail this part. Point being, I think USPS is missing out on lost revenues, big time.

[Demaestro]

Here are a few differences that I think are major factors.

Canada makes use of a lot more automation in the areas of sorting mail for delivery. The USA doesn't

Canada has privatized the post office retail outlets, in Canada you don't go to the local post office, you go to the local drug store (usually a Shoppers Drug Mart) and they have a post office counter. If you have parcels to pick up you do it there, if you buy stamps you do it there.

We don't have door delivery service everywhere either. They do box delivery in all the new areas and soon the older areas as well. The way this works is for each block, and sometimes combined with another block, there is a large mail box, with a bunch of locked boxes, kind of like cubbyholes, there is a locked cubby for each house, you get a key and they deliver all the mail to that box. This speeds up delivery a lot and allows larger areas to be covered by a single delivery person. I heard talk of them trying this in places in the USA and it didn't sound well received. (I like it for the security, no one can poach a new credit card or gov check out of my mail box while I am at work)

In Canada mail only comes Mon-Fri. No weekend delivery, which I also heard they are thinking about trying in the USA, it too didn't sound well received.

Canada's post office union was just threatening to strike again recently after just having one but they backed down. I think the major difference is in Canada they are willing to changes how things work to keep things cheaper and more efficient, in the USA it sounds like keeping the status quo is more important than fixing the problems.

[dpd1]

Keep in mind, the US mail service is one of those things that has national sentimentality, especially with older people. And they're the ones that have time to gripe to their Congressman if they don't like something. Walking out to get your mail at your own home box... Going to an official PO... The price of stamps... These are all things that are sort of 'Americana'. Honestly, I kind of feel the same way. It may not be the most efficient system there is, but it actually works pretty darn good when you think about it. Corporate America is real good at making things more 'efficient', but that's not always better. Walk into a Home Depot today... That may be a more efficient biz model, but can any older people honestly say they like going there better than the old school hardware stores they had when they were younger? Probably not.

It's like if you asked kids to not have summer vacation anymore or something like that. Just un-American. Other ways may be more efficient, but you are going to have people fighting against it. But inefficient or not, this is the system we have, and it is cheap compared to all other services. So now that it is that way, it's going to be very hard changing it in a way that people won't hate. It's like all the immigrant labor we have... People use to be willing to pay 10k to paint their house, because that's just the way it was. Now they think they're getting ripped off if somebody wants more than 2k. The standard has been set and they're spoiled.

[Leosghost]

US mail is iconographic [imdb.com...]

[dpd1]

That movie was terrible, but that's a good example... The Pony Express and all that... "The mail must go through". It's something closely tied to our history. Funny... So is passenger rail service. And that keeps needing funding as well. lol

[Demaestro]

I think dpd ha hit on the crux of the issue. People feel entitled to Saturday and door service. While I understand the sentiment I think it is a horrible reason to stick with the status quo.

I think the apathetic perception of what 1 billion dollars actually is has become so bad that people look at a $5 billion loss and say "It is only 5, it is worth it to have mail on Saturday and not have to cross the street to retrieve my mail"

Really? $5 BILLION is a massive price for those small luxuries. Especially when things like Social security and medicare are on the chopping block.

I think people need to stop saying 5 billion and start saying 5000 million, it just sounds bigger.

[JackieBlue]

The post office was making money until a few years ago. They are hamstrung in their ability to increase rates and have little control over their costs. Even though the post office is expected to operate like a for profit company - the laws are set up against them. Let's see
1. An outside entity dictates the price you can charge. 2. An outside entity decides where and when you can provide service and what manner that service provides.
3. An outside entity decides what retirement options you must provide
4. An outside entity decides what level of employee you need.

If my business was run this way I'd be bleeding red ink too.

[Planet13]

Guys, it is pre-funding of retirement - something that no other US government agency is required to do - which is resulting in the humongous loss. It's an accounting thing, NOT an operational thing.

Whether the USPS would be profitable without having to pre-fund the retirement is debatable, but when you hear the next politician saying that they need to take a hatchet to the US Postal service, just realize that they are talking out their backsides; it was congress that required the crazy accounting in the first place.

On a side note:

Many times I have to drop off packages "after hours" at both the main post office in town and at the UPS facility. I pull up in back where the big trucks drop off and pick up mail / parcels.

Easily, the guys at the loading docks at the US Post Office in my town are working harder, cooperating more amongst each other, and more friendly to the other Joe Blows who are dropping off parcels after hours than the people at UPS.

Why is this? I don't know. Maybe they are all afraid of getting laid off. But it's been this way since I ever started dropping off packages after hours (for a few years now).

[dpd1]

Has anyone received the notice to go online and fill out the satisfaction poll for business shipping? I thought it was pretty fair. It was better than the usual polls places give where you get the feeling nobody is ever even going to read it.

[Rugles]

dropping off parcels after hours than the people at UPS.

UPS relies on a lot of part timers in the warehouses. They have to earn their keep as a part timer for a few to several years before they are offered full-time employment.

At least is the way UPS operates around here.

So I am suggesting you are seeing the difference between part time and full time employement at the tow different places.

[Planet13]

@ Rugles

So I am suggesting you are seeing the difference between part time and full time employement at the tow different places.

Could very well be. Seems to be lots of new faces at UPS, while the people at the loading dock at the post office seem to be regulars.

[Rugles]

Wow, I should proof read. Or perhaps, not post while I am on hold with a customer.

[Marshall]

From Time.com [time.com]

Select parts of the article. Interesting things in bold.

How did the country's second largest employer (after Walmart), which operates the world's largest fleet of vehicles and handles 40% of the world's mail volume, arrive right at the edge of bankruptcy? A toxic combination of the bad economy, an increase in online bill paying, e-mail and other digital communication, and congressional mandates have created billion-dollar deficits for the USPS since 2007. Last year it lost $8.5 billion. Officials say the Postal Service will run out of money by next August or September, and absent congressional action, it will default on a postponed $5.5 billion retiree payment due Dec. 16, 2011.

It wouldn't be far-fetched to argue that the Postal Service has been the most important local institution in our country's history. The Founding Fathers considered it so important that they put it in the Constitution, mandating that Congress have the power to establish post offices. For decades, it was the largest public-sector employer in the U.S. At one point in the 19th century, three-quarters of all government employees were postal workers.

To this day, the last mile can be an expensive piece of road. Want to send a letter to the Havasupai Indian Reservation at the bottom of the Grand Canyon? The Postal Service will take it there by mule. Need to mail a package to the Alaskan wilderness? The USPS can get it there by parachute. Have to mail something to someplace along Alabama's Magnolia River? The USPS has boats that travel from dock to dock. It has even sent mail via pneumatic tubes, missiles and hovercraft. And somehow, it costs just 44 to get a letter anywhere within the U.S. (Well, 45 starting Jan. 22.)

The USPS is a quasi-governmental public utility. It's a semiautonomous organization that is only partly private.

If things weren't bad enough, the USPS is increasingly relying on junk-mail revenue which has grown significantly in the past couple of years. "I love the term junk mail," Donahoe says sarcastically. "If you work in the Postal Service, it's jobs mail. The interesting thing about that is, direct mail has probably got the best return on investment of any kind of advertisement." That means, expect even more junk mail in the future.

In the end, the debate about the USPS is simple: it's about the privatization of a service that is supposed to be universal. But universal access doesn't exactly sync with the market's guiding hand. That's why UPS and FedEx don't ship everywhere. It's just not profitable. So where do they turn for last-mile delivery? To the Postal Service. Those private mail carriers are two of the USPS's biggest customers.

Hope this answers some questions posted here.

Marshall

[Planet13]

Did the article mention prefunding retirments? If not, they are missing the biggest part of the pie.

"We are required to make this $5.5 billion dollar payment into the future retiree health benefits fund, and probably won't be able to make it when it comes due September 30th."

Postal Service spokeswoman Yvonne Yoerger said at that hearing, Postmaster General Patrick Donahoe will insist that the fund be re-scaled from the days when there were 900,000 people on the payroll. The mandated funding level has not changed in the years since then, although the Postal Service has trimmed 250,000 jobs.

She said "the fact is, no other government agency, and few corporations in the private sector are required to fund retiree health benefits 75 years out."

So the US Postal Service is STILL required to pay into a fund covering the retirement benefits of 250,000 workers WHO DON'T EXIST.

My opinion is that there are some lawmakers in the US who quite simply want the Postal Service to go belly up since (according to their political philosophy) they want a free-market postal system. Hence they burden it with a nonsensical funding requirement so as to make it look like it is loosing money hand over fist.

[Planet13]

Had an interesting (as in BAD) night at the UPS (as in NOT postal service) docks last night when I dropped off some boxes for ground delivery.

I pulled up around 10:00 and walked over to the loading docks with about three small packages. Walked past the same people whom I have always walked past for the last 5 years. Placed the packages on the same platform where I have been placing them for the last 5 years.

Then some older man who looked to be a supervisor of some kind (he WASN'T wearing brown) starts screaming at me from across the docks, telling me that I didn't belong there. He was FURIOUS!

Anyway, I looked at the other UPS people working, and no none seemed to be paying attention to him (it was really loud and to be honest I don't know if anyone was sure whom he was yelling at), so I just left the packages there and walked away.

But man, that guy was rabid last night...

[HRoth]

I have always had bad experiences with actually going to UPS. They simply ignore customers or treat them with incredible rudeness. It doesn't matter if you are picking up or leaving off. This is one of the many reasons I don't use UPS. That and the fact that for years, they would only accept checks as payment. Or that they did not supply boxes. Or that that you had to have a substantial amount for a pickup. Etc. In contrast, their drivers are great. I don't get why there is such a split between how the drivers act and how the people at the terminal or whatever it is called act. I will never use UPS if I can help it, though.

[Planet13]

In contrast, their drivers are great.

Agree 100%

Maybe it's because they are the ones who have to face the music everyday they know they have to be on their game?

[Rugles]

"We are required to make this $5.5 billion dollar payment into the future retiree health benefits fund,

UPS and FedEx has to do this as well, I would think.

The solution is obvious. Raise the price of postage and cut back on services (fewer delivery days to homes for example).

Or that they did not supply boxes.

^^^ another "free" service they should end.

[Planet13]

UPS and FedEx has to do this as well, I would think.

I believe that they don't, but will have to double check. And even if they did, they would certainly not be paying into a retirement account for employees who do not exist.

Or that they did not supply boxes.

^^^ another "free" service they should end.

The "free" boxes require the user to pay Priority Mail rates, which are higher than first class or parcel post rates, since the free boxes are ONLY for priority mail.

(If someone wanted to ship first class or parcel post, they can PURCHASE a Ready Post box from the post office - but those ain't free.)

Priority Mail is one of the more profitable mail services that the USPS has, so encouraging people to use Priority Mail by giving away free boxes is one of the smarter things they do (if I am not mistaken).

[HRoth]

According to news articles, the post office has been required to make payments for the health benefits of all retirees for the next 75 years, and they must make those payments within a ten-year period. There is not a company in the world that does that or that could survive it if they were forced to do it, like Congress has forced the post office. And why has the Congress done that? So they could destroy the post office and open up another spot at the feeding trough for corporations.

Yes, giving away boxes for priority mail--and especially for flat-rate mail--is really financially smart for the post office. It is first class they are losing money on. Even so, they would be in the black without this forced funding thing.

[JackieBlue]

UPS and Fed EX do not have mandatory Federal Pension requirements. Fed Ex I am pretty sure has a normal 401k type plan (a matching plan) and UPS has something similar but may be bulked up some. The postal system is required to provide a fully funded pension and the US Congress has mandated the payments to the system (part of the Federal System) to help shore up the overall system, not just postal employees.

Regarding the boxes, both UPS and Fed Ex provide "free" packaging for many of their services and even include pouches and branded thermal labels.

The postal systems problems are about 75% interference from the government. They are told how to run their business, where to go, how much to charge, etc, but are expected to be self funding a profitable. You cannot run a business this way. About 15% is due to fundamental changes due to technology (email, fax, etc). You cannot adapt to this if you are not allowed to change by your overseer.

The other 10% is from having an older unionized work force. In my mind, this is a smaller issue in that the post office could have adapted to this given time, mainly through attrition, as this work force retired.