USPS posts $3.5 billion third quarter loss

The U.S. Postal Service on Thursday reported a $3.5 billion loss in the third quarter of fiscal 2010, despite continued reductions in employee work hours and other cost-savings measures.

According to Chief Financial Officer Joe Corbett, USPS' obligation to participate in federal benefits programs, including a $17 billion workers' compensation liability, was the "culprit" for increased expenses over last year. The Postal Service reported a $2.4 billion third quarter loss in fiscal 2009.

"Given current trends, we will not be able to pay all 2011 obligations," said Corbett. "We can't continue to just keep losses where they are. We have to be profitable."

Salaries and benefits account for 80 percent of the Postal Service's expenses, he said, adding the agency will continue to cut back on work hours. During the first three quarters of fiscal 2010, USPS cut 63 million work hours, or the equivalent of 36,000 full-time jobs. The largest reductions were in mail processing and customer service, followed by city and rural delivery.

Despite losses, the Postal Service is on track to eliminate $3.5 billion in costs by the end of fiscal 2010 due to "process improvements," said Postmaster General John Potter during an agency meeting on Thursday.

Louis Giuliano, chairman of the USPS Board of Governors, said lowering the $238 billion deficit depends on "corrections of things that probably shouldn't be," including reducing the number of delivery days and changing the agency's obligation to prefund its retiree health benefits at more than $5 billion annually. "The fact is, six- to five-day delivery hasn't happened, a change in health benefits funding hasn't happened, despite two years of work," he said.

In recent testimony submitted to the Postal Regulatory Commission on behalf of the National Association of Letter Carriers, former USPS Chief Financial Officer Michael J. Riley wrote that eliminating Saturday delivery would be a "grave error" for the Postal Service. The proposal would cut valuable services and eliminate the agency's competitive advantage over other delivery companies, as well as "reinforce the negative stereotype of the Postal Service as an inefficient government entity rather than a vital service-oriented enterprise."

"Contrary to the Postal Service's assertions, eliminating Saturday delivery is not necessary to improving its finances," Riley wrote. "Indeed, going to five-day delivery is not only unnecessary, but would be harmful to the long-term health of the Postal Service."