The United States Postal Service (USPS) is technically bankrupt, with liabilities exceeding assets by $14 B in 2010. It might be entertaining to speculate on how we could apply private-sector turnaroundtechniques to make lemonade out of this lemon!
In 2010 USPS lost $8.5B on operations including a $5.5B payment to pre-fund retired employee health benefits. Its borrowing capacity, limited by law to $15B, will be reached this year.
First class mail, which represents about half its revenue, has fallen by 45% since 1998 and 19% 2010 vs. 2007. From 2009 to 2020, it is expected to fall 37% more. At that point, unless things change, the Postmaster General (USPS CEO) expects an annual loss of $238B on operations! So what is USPS doing to offset this decline in its core revenue?
The law says it cannot introduce new products unrelated to delivery and shipping. The law says it cannot raise stamp prices beyond an inflation-based price cap. The law says it must deliver 6 days per week, to every mailbox in the country: 151 million, growing by ¾ of a million annually. The union contracts provide for above-market wages and benefits growing much faster than inflation, and these are 80% of costs.
With volume spiraling down and revenue options limited, management has addressed costs: automation to eliminate the jobs of these expensive employees, and asking for approval to close about 12% of the 31,000 post offices in the country and eliminate Saturday delivery. Naturally, it would also like to increase postal rates.
On the plus side of the ledger, USPS has an infrastructure that reaches all of America. What could it be used for? In other countries, the Post Office sells financial products, operates banks, and charges higher postal rates. In some other countries, the government decided to privatize the Post Office, selling it to private interests and using the proceeds to retire debt. Could that work here?
Might one spin off just the delivery part (with most of the people), and keep the sorting/shipping infrastructure as a wholesale backbone? If the delivery function was privatized, would there be one delivery entity per city, or one for the country, or seven regional entities like the AT&T breakup, or would the number of delivery entities be unlimited to foster competition? Is it better to spin off both delivery and backbone, but do so separately? Would the USPS delivery assets be auctioned, or assigned to successors? What about the employees? Would the bankruptcy process be used to void union contracts or retiree health benefits in this process? Could bankruptcy be used by an “independent agency of the executive branch” which is not a company? Would the feds keep a “golden share” to ensure that the public interest was protected?
Or should the USPS sell access to its monopoly, that is, allow others to deliver or stuff documents into to mailboxes marked US Mail? Or should it just shed employees by changing to a pickup rather than a delivery service, with delivery available for an extra fee?
What about it, turnaround experts? How would you use turnaround techniques for a technically-bankrupt USPS?
Tom Gray is a management consultant and Certified Turnaround Professional (CTP). He led the Ameritech team in negotiating the privatization of Belgacom, the Belgian telephone company. He can be reached at 630-512-0406 or email@example.com. See www.tom-gray.com