- The Postal Service cannot be a viable enterprise, maintain current service levels, pay wages at or near current levels, and price products at levels that allow mail to be a competive mode for delivering advertising, other firms of business and personal communications and parcels as long as the retiree health obligations hang over its head.
- The Postal Service's obligation has been overstated by the Office of Personnel Management.
- The Postal Service has overpayment of its obligation for civil service pensions exceeds its obligation for retiree health benefits. Fixing this problem would eliminate most if not all of the Postal Service's annual obligation for retiree health benefits.
- The only obstacle to fixing the problem is budget scoring and pay-go rules.
Today, Bloomberg reported that Ford would cover its quarterly obligation for its retiree health benefits by issuing $610 million in shares of Ford stock and handing it over to the United Auto Workers Retiree Medical Benefits Trust. Ford has not always used to stock as in December it made its $610 million payment in cash. Ford has the obligation to make funds to the Trust until 2022 and prior to making payments it had an obligation of $13.2 billion most of which s funded with Ford debt that the trust holds.
The description of Ford's debt obligations to the United Auto Workers Retiree Medical Benefits Trust from its first quarter 2010 10Q is as follows:
Ford has the obligations that it has for retiree health benefits because it agreed to the funding in return for concessions by the United Auto Workers on contract provisions. Similar obligations were made by GM and Chrysler, although both GM and Chrysler have paid a higher share of their obligation than Ford in the form of company stock.
Why would Ford use stock? "Paying in stock means Ford could deploy the cash it saves to reduce its debt and improve its balance sheet" Ford needs to conserve cash so that it can pay down the $31.3 billion in debt that it holds. Ford has so much debt because it borrowed heavily in early 2008 which allowed it to avoid the structured bankruptcy fate of GM and Chrysler.
The Postal Service has only the option of paying cash. Privatizing the Postal Service would give it the same options that companies like GM, Ford, and Chrysler have to pay these obligations without using cash. As long as the Postal Service remains part of the federal government, its only option will be cash payments and pay-go rules will determine how much the Postal Service and therefore employees and postal customers must pay.