The U.S. Postal Service may lose $10 billion in the fiscal year ending September 30, according to Postmaster General Patrick Donahoe. The loss will leave the service unable to make required federal government payments and put it at risk of default as it reaches its $15 billion borrowing limit.
Today Donahoe, who is also the the service’s chief executive officer, urged Congress to take action, saying it was “sorely needed by the close of this fiscal year,” which comes at the end of the month. Last month, the Postal Service asked Congress to allow it to break union contracts in order to institute mass layoffs, cut spending on health benefits for future retirees, and end mail delivery on Saturdays.
Mail volume is expected to decrease 2% this year from last, and has declined 22% since 2006. With revenue declining, the Postal Service wants to eliminate 220,000 jobs, or roughly 39% of its full-time workforce, by 2015. The proposal would include firing 120,000 contracted employees, a practice the service has traditionally avoiding in favor of cutting employment through retirement and voluntary departures.
Two of the service’s largest unions, the National Association of Letter Carriers and the National Postal Mail Handlers Union, are both in negotiations over new contracts at the moment. The groups’ current contracts are set to expire November 20. The American Postal Workers Union, which has 250,000 members, signed a contract with the USPS this year that prohibits firing most employees until its expiration in 2015.
If the USPS is unable to gain Congressional approval to fire contracted laborers, it could run out of money to pay both employees and suppliers as soon as August 2012, according to CFO Joseph Corbett. The changes continue to benefit other parcel shippers FedEx (NYSE:FDX) and UPS (NYSE:UPS).