Responding to the Postal Economic Crisis

What a difference a year makes.  Last Spring, mailers were focused on the first rate increase and a series of important studies and rulemakings being conducted by the Postal Regulatory Commission under the postal reform law (PAEA).  NPPC was as focused and participatory as any stakeholder on the new rates, IMb, the universal service obligation and much more.  Today, all of that, as important as it was and is – plus adding more issues, such as Move Update – has paled as mailers and the Postal Service confront the common challenge:  managing through a severe economic downturn.

It’s no accident that USPS likely will have a cash shortfall of $1.5 billion, a loss of up to $10 or 12 billion, and is scrambling to make up the difference through dramatic cost cutting, innovative rate offerings such as its “Summer Sale,” borrowing, and seeking legislative relief on prefunding retiree health obligations (RHBF).  When you look around at the industry, it’s clear the pain is shared.  Whether it’s magazines and newspapers, printers and paper companies, direct marketers and catalogers, parcel shippers and envelope manufacturers, mail services and technology suppliers, or NPPC member mailer companies, everyone in the mailing arena is under enormous budgetary pressure from reduced business and financially conservative strategies as a response.  The result has been a sharp contraction in mailing.

One of the things NPPC is doing in response is to actively support legislative relief on the RHBF front.  By rescheduling – not eliminating – these prefunding payments, USPS stands to reduce its costs some $2 billion per year.  It’s an essential part of ensuring that USPS can survive in the short term without tax dollars and all the problems a genuine “bail-out” would bring, and then look ahead.  But that look ahead will require perhaps more time, energy and effort by NPPC, along with other stakeholders, to help map out and execute a plan to help USPS sustain itself into the future in a way that remains as useful as it is now.

The best expert advice, not to mention word on the street, is that mail is simply not going to come back to the same level that existed prior to the downturn.  If that prediction holds true, we will have a postal system built for 300 billion pieces servicing 170 of 180 billion, if we’re lucky, for the foreseeable future.  Restructuring and downsizing of the system will be necessary to enable a cost-effective and efficient postal system to continue.  We intend to be part of that discussion on Capitol Hill, at the postal agencies, and with other stakeholders.

Mail Service Update