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Post Office Aims to Save Billions With Reductions in Workforce, Delivery Time

The U.S. Postal Service, having lost 29 percent of its first-class mail volume in the last decade, will slow its delivery service beginning next spring -- the first time in 40 years -- in an effort to eliminate nearly $3 billion in costs for the cash-strapped agency. 

"We have to do this in order for the Postal Service to become financially viable," said David E. Williams, vice president of network operations for USPS, who noted Monday that the organization expects to have a $14 billion debt this year.

"We are adjusting operational realities to the current market," he said, adding that the trend is toward another 47 percent drop in volume between now and 2020.

In 2010, the Postal Service processed and delivered 78 billion pieces of first-class mail, but the coming changes are intended at quickly trimming costs and averting bankruptcy. 

The reduction in turnaround time 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.

Williams said that instead of having a 6 to 6 1/2-hour operating window, it will expand to 16-20 hours in order to reduce the pieces of equipment needed in the network. As a result, the Postal Service will lose 252 of the 461 mail processing centers across the country and 28,000 jobs will be cut by the end of 2012.

Williams said the changes are not surprises. The Postal Service announced in September that it was looking to make the cuts, which need to go in the Federal Register for a comment period so they can be instituted as early as March.

"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 Postal Service already has announced a 1-cent increase in first-class mail to 45 cents beginning Jan. 22.

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.

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.

Williams said, however, that never was there a guarantee of next-day service for first-class mail.

"We do not guarantee the delivery of first-class mail by a certain time period. The only guarantee that we have for any of our products is express mail. That's not going to change," he said.

The consolidation of mail processing centers is in addition to the planned closing of about 3,700 local post offices.

Expressing urgency to reduce costs, Postmaster General Patrick Donahoe said in an interview with The Associated Press 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. 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 Associated Press contributed to this report.