Postal Retirement and Plant Consolidation

Today, the Washington Post reported that 23,000 postal clerks and mailhandlers have either already accepted the retirement offer and left the Postal payroll or are likely to leave the Postal Service by the end of the year. This reduced the full time complement of clerks and mailhandlers by 11.5%. The 31,000 Part-time workers have an additional month to accept the incentive.

In all likelihood, the acceptance rate of clerks and mailhandlers met management expectations. In some plants, this will reduce or eliminate the need to place employees in "stand-by rooms." More importantly, it may reduce the workforce sufficiently to allow the current efforts to consolidate facilities to occur and still allow remaining employees to retain a job.

As noted in the Dead Tree Edition, the Postal Service announced the possible closing or downsizing of 15 additional postal facilities in the past two weeks and adding those already announced the Postal Service has 29 consolidation efforts under consideration. The active proposals are concentrated in three areas: Capital Metro (7), Eastern (6), and Western (7). The New York, Northeast, and Southeastern areas account for 11 of the 17 consolidations that the Postal Service announced as approved or implemented. Given that it takes six months from announcement to approval, all areas could announce additional consolidations in the next two months for approval and implementation before fiscal year 2010 starts and take advantage of the reduced head count from early retirements.

Given the current financial challenges, the Postal Service should seriously think about re-opening consolidation proposals in at least Quincy, IL, Hattiesburg, MS, Mansfield, OH, Zanesville, OH and Utica, NY. The studies of Hattiesburg, MS, Mansfield, OH, Zanesville, OH sugeests that by not going throgh with these consolidation efforts, the Postal Service incurs around $2 million extra expenses annually.

Unfortunately, even if the Postal Service doubles the number of active consolidation proposals, the total savings will only put a small dent in the operating deficit. Given the six months that it takes to get a proposal approved, the Postal Service could save half of he $100 million that the Dead Tree Edition estimates in FY 2010. Clearly, additional consolidations will come given the current financial hole.

Finding additional consolidation options will become increasingly difficult as long as 1) political interference colors management decision making; 2) new facilities remain off the table due to lack of investment capital, and 3) postal management will not propose changes that have a net impact of slowing service for 15% or less of the mail originating in a facility.

Designing a new postal network without these constraints is needed now. Mailers have indicated in testimony before the PRC that they would accept changes in service as the cost of a more efficient network. Postal Management should prepare such a plan, and the capital costs associated with it, or find that Congress imposes as conditions for modifying the retiree benefit payment schedule a network operating plan of its own.