By: Eric Morath
The U.S. Postal Service on Thursday reported a $5.2 billion quarterly loss and said it was nearly out of cash and likely to exhaust its government credit line in coming months.
The agency said the loss was its widest since it began releasing quarterly financials in 2007. But Postmaster General Patrick Donahoe said the Postal Service would do whatever it takes to maintain its operations, even if that means defaulting on a second multibillion-dollar retiree obligation in as many months.
"We will do everything we need to do to make sure the mail is delivered," he said. "Congress needs to act responsibly and move on this legislation." Losses and defaults will continue, despite cost-cutting efforts, unless Congress passes a postal-overhaul bill, Mr. Donahoe said.
The Postal Service's loss for its third quarter ended June 30 compared with a $3.1 billion loss for the like period a year earlier. Charges taken in connection to a mandate to prefund retiree health care drove the loss in the latest quarter, but declining first-class and advertising mail volume were a drag on revenue.
Mr. Donahoe said the Postal Service would pay its employees and critical vendors but might skip some payments to others.
He said current retirees aren't at risk of losing insurance coverage. While the Postal Service may tap all its credit from the U.S. Treasury by October, finances should improve later in the year with election mail and holiday deliveries propping up revenue, the agency said.
The Postal Service defaulted for the first time in its history on Aug. 1, failing to pay $5.5 billion for future retiree health benefits. A similar $5.6 billion payment is due at the end of next month. The agency said it wouldn't make that either, unless Congress acts.
The Senate passed postal-overhaul legislation earlier this year, but the House hasn't take up the bill or a plan drafted by Republicans."I'm not sure how much more evidence leaders in the House of Representatives need before they realize that the Postal Service is in dire straits," said Sen. Tom Carper (D., Del.), one of the Senate bill's authors. A spokesman for the House Oversight and Government Reform Committee said no date has been set to take up the legislation. The Postal Service has criticized the Senate plan for not going far enough. For example, the bill makes it difficult for the Postal Service to implement its plan to cut delivery to five days a week to reduce costs.
Rep. Dennis Ross (R., Fla.), a co-author of the House bill, said Thursday's loss shows the Senate bill, which would eliminate the prefunding requirement and return pension overpayments, isn't enough. "These declines, without right-sizing the expense side of the postal equation, spell the end of the Postal Service," he said.The House bill, which allows for more sweeping changes that would enable the post office to cut costs sooner, has met resistance from some lawmakers who are concerned it would lead to slower service and more post-office closings.
Excluding losses tied to retiree health care and workers' compensation, the Postal Service lost $1 billion in the latest quarter. That marks an improvement from a year earlier, when the operating loss totaled $1.3 billion.
By the end of this month, the Postal Service will have closed 48 mail-processing plants this year. It plans to shut 92 more next year.
In a positive sign, the agency said it is seeing growing sales from its parcel business. Led by "If It Fits, It Ships" service, the shipping revenue was up 9.9% for the quarter. That wasn't nearly enough to make up for a 3.1% decline in first-class mail, still the main revenue driver.