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Unprecedented cuts by the cash-strapped U.S. Postal Service will slow first-class delivery next spring and, for the first time in 40 years, eliminate the chance for stamped letters to arrive the next day.
The estimated $3 billion in reductions, to be announced in broader detail later Monday, are part of a wide-ranging effort by the Postal Service to quickly trim costs and avert bankruptcy. They could slow everything from check payments to Netflix's DVDs-by-mail, add costs to mail-order prescription drugs, and threaten the existence of newspapers and time-sensitive magazines delivered by postal carrier to far-flung suburban and rural communities.
That birthday card mailed first-class to Mom also could arrive a day or two late, if people don't plan ahead.
"It's a potentially major change, but I don't think consumers are focused on it and it won't register until the service goes away," said Jim Corridore, analyst with S&P Capital IQ, who tracks the shipping industry. "Over time, to the extent the customer service experience gets worse, it will only increase the shift away from mail to alternatives. There's almost nothing you can't do online that you can do by mail."
The cuts would close roughly 250 of the nearly 500 mail processing centers across the country as early as next March. Because the consolidations would typically lengthen the distance mail travels from post office to processing center, the agency would also lower delivery standards for first-class mail that have been in place since 1971. Currently, first-class mail is supposed to be delivered to homes and businesses within the continental U.S. in one to three days; that will be lengthened to two to three days, meaning mailers could no longer expect next-day delivery in surrounding communities. Periodicals could take between two and nine days.
The Postal Service already has announced a 1-cent increase in first-class mail to 45 cents beginning Jan. 22.
About 42 percent of first-class mail is now delivered the following day; another 27 percent arrives in two days, about 31 percent in three days and less than 1 percent in four to five days. Following the change next spring, about 51 percent of all first-class mail is expected to arrive in two days, with most of the remainder delivered in three days.
The consolidation of mail processing centers is in addition to the planned closing of about 3,700 local post offices. In all, roughly 100,000 postal employees could be cut as a result of the various closures, resulting in savings of up to $6.5 billion a year.
Expressing urgency to reduce costs, Postmaster General Patrick Donahoe said in an interview that the agency has to act while waiting for Congress to grant it authority to reduce delivery to five days a week, raise stamp prices and reduce health care and other labor costs. The Postal Service, an independent agency of government, does not receive tax money, but is subject to congressional control of large aspects of its operations. The changes in first-class mail delivery can be implemented without permission from Congress.
After five years in the red, the post office faces imminent default this month on a $5.5 billion annual payment to the U.S. Treasury for retiree health benefits; it is projected to have a record loss of $14.1 billion next year amid steady declines in first-class mail volume. Donahoe has said the agency must make cuts of $20 billion by 2015 to be profitable.
"We have a business model that is failing. You can't continue to run red ink and not make changes," Donahoe said. "We know our business, and we listen to our customers. Customers are looking for affordable and consistent mail service, and they do not want us to take tax money."
Separate bills have passed House and Senate committees that would give the post office more authority and liquidity to stave off immediate bankruptcy. But prospects are somewhat dim for final congressional action on those bills anytime soon, especially if the measures are seen in an election year as promoting layoffs and cuts to neighborhood post offices.
The Postal Service initially announced in September it was studying the possibility of closing the processing centers and published a notice in the Federal Register seeking comments. Within 30 days, the plan elicited nearly 4,400 public comments, mostly in opposition.