Saturday, January 1, 2011

Prediction for 2011 from Fox Business News

Charles Payne made the following prediction on the Fox Business News website. 

"UPS and FedEx will enter into a bidding war for the Unites States Postal Service. The deal is close, but unions balk."
The prediction provides another illustration of how difficult it will be to fix the Postal Service, when commentators are paid to make statements that have no basis in reality.

So what is wrong with this statement:
  • There is no business reason for UPS or FedEx to buy the Postal Service.    The markets that the Postal Service serves best (advertising and document delivery) are markets that do not fit into either FedEx's or United Parcel Service's business of marketing parcel delivery, air express and cargo transportation, truck transportation, and global logistics. 
     
  • UPS and FedEx find not owning the Postal Service to be profitable. UPS and FedEx make money providing air and other transportation services to the Postal Service and using the Postal Service to deliver light weight parcels to households.   Buying the Postal Service would add additional management challenges and could put the benefits of the current relationship with the Postal Service at risk.

  • Both FedEx and United Parcel Service have corporate cultural issues that would keep buying the Postal Service off the table.  FedEx has made numerous purchases of existing firms in the past in trucking, logistics, and retail printing services.  None of its purchases have been unionized firms and it would seem unlikely that FedEx would start with the Postal Service.  

    United Parcel Service has a close working relationship with its union, the Teamsters and adding the Postal Service could create conflicts between Teamsters and Postal Union leadership.   New labor agreements that the Postal Service will sign in the next year will likely result in wage and benefit structures that are not as generous as what UPS offers its delivery drivers.   Adding the Postal Service could create unwanted pressure to raise wages and benefits to levels offered to Teamsters by UPS.  (The higher compensation levels would likely be linked to strict performance standards and flexibility in the use of part time workers that does not currently exist at the Postal Service.)

  • Both FedEx and United Parcel Service understand that buying the Postal Service requires fixes to retiree benefit issues recommended by the USPS-Office of Inspector General.     Purchase of the Postal Service, or for that matter privatization requires a clean balance sheet  and sufficient cash flow to allow the private owner to use profits to invest in plant, equipment, training, and transition costs.    The current payment schedule does not allow for investments needed to make the Postal Service a financially viable private sector firm.
There are probably other reasons why this idea makes no sense.   Given how bad Mr. Payne's prediction was, clearly business stakeholders in the future of the Postal Service should spend some time working with the commentators, producers and  on-air hosts at Fox Business Channel, CNBC, and other influential business news sources that do not regularly cover the Postal Service in order to reduce the noise that could prevent progress in passing legislative changes necessary to ensure a viable postal industry for then next decade.

9 comments:

not retiring yet said...

A factor left out of this article, is FED EX, and UPS both have contracts with the USPS. Fed Ex has an airfreight contract, that would disappear, if they purchased USPS. Many $$$ would become an expense, instead of income. Reason not to purchase USPS. UPS delivers packages to USPS, they would have to deliver the packages at their expense.

dryMAILman said...

Next week on FBN: Charles Payne predicts UPS/FedEx bidding war over late night pizza delivery to the Northside of Minneapolis. Payne will note lack of competition and abundant non-union labor makes delivery to crack dealers with designer high image attack dogs a 'very lucrative business model'.

Anonymous said...

FED EX an UPS don't want anything to do with the USPS. The post office is required to deliver to non profitable rural areas. FED EX and UPS get to pick and choose the most desireable locations so they can stay in the black. Give the post office that option and they'd be a money making machine too.

Anonymous said...

The Postal Service will not be privatized until after 2016 when ALL future ritiree costs will be funded until at least 2060 thus achieving the intended goal of the prefunding mandate which is to make the sale of the Postal Service feasible unlike large corporations like general motors with large legacy costs which is the reason only the government could bail them out. It will not be UPS or Fedex but most likely Deutsche Post/DHL taking over the US Postal Service as they have done to many other government postal services. They have been in the mail and parcel business for many years AND they have their own planes and hubs already in the united states. What ever happened to those planes? John Kasich shot a campaign commercial in front of their hub almost a year after they closed and the planes were still there.

Anonymous said...

We could only wish to be members of the teamsters union. Our union nalc, has sold us out and continues to do so on a constant basis

Anonymous said...

The privatisation of the usps will be the mail processing centers and although the local post offices will be consolidated they along with the carriers will remain apart of the U.S gov.

Create a digital signature said...

Business plans need to have realistic assessments and with these many economic predictions, we can only hope for best.

Anonymous said...

If one would look at the way the USPS is mandated to purchase products, whether in small or large quantities, it is unfair for the USPS to pay retail prices and even more on items which can be bought at lower prices every day. UPS and FEDEX both most likely purchase products at their lowest prices available. The USPS can only go through particular venders which charge retail prices. I myself would not pay the prices the USPS has to pay for items. I work for the USPS and have seen this first hand every day. This is a major cost associated with the pilling debt of the USPS. Let the USPS purchase products the way private industry does and the USPS will come out of debt more quickly. We should not be penalized just because we are a government facility when the USPS is a seperated from the government and no tax dollars go toward the running or stability of the USPS

Alex said...

Conservative commentators,and especially those on Fox News, are usually totally igonorant, and do little research on the topics they commenton . They are all "shoot from the hip' types and just like to make lot a noise to get attention. There usually is no substance to anything they say. The proper term to describe them is "blowhards'.