The U.S. Postal Service is facing a dire financial crisis, but it is not alone. The postal services of other nations also have felt the impact of electronic communications and private sector competition, and have been undergoing significant transformations.
Germany and the Netherlands have embraced privatization. Great Britain is moving slowly in that direction with its Royal Mail. The postal services in Australia and Canada have no Saturday delivery, and other countries are reaching the inevitable conclusion that mail service has to change.
“I don’t think there are great lessons to learn from Europe. The U.S. Postal Service is a mess. Nobody in the private sector in his right mind is going to want to buy this thing.” – Gene Del Polito
Deutche Post, the German mail system, started privatizing in 1995. Today, one-third of it is owned by the German government, the rest by private investors. And it is profitable.
Earlier this month, it reached an agreement with the German union Verdi to cut wages of new mail employees by 4 percent in exchange for guaranteeing the jobs of 130,000 German mail workers through 2015.
It was the latest deal to keep Deutche Post fiscally healthy. In 1998, Deutche Post bought DHI, an international company much like FedEx. Then it bought all sorts of transportation companies, making Deutche Post one of the world’s major transportation companies and turning the post office into a much bigger and profitable entity.
“Generally, the service is pretty good. The quality of the postal service has increased in Germany. The company is making money. It’s profitable,” said James I. Campbell Jr., an international postal expert based in Potomac, Md.
Some 96 percent of all letters mailed in Germany are delivered within one night. But the convenience is pricy: A stamp costs 74 cents.
“A lot of branch offices have been closed in rural areas. This was partially compensated by private postal service centers in shops and gas stations. But the overall service is good,” said Klaus Veitl, an electronics expert from Ulm, Germany, who recently lived in the U.S. for two years.
Industrialized countries around the world are facing the same problems. They grew up using paper communications with lots of postal workers moving the product. Today, paper is being replaced by electronic communications.
Some postal systems are in debt, facing new economic constraints and competition from the parcel delivery shippers like FedEx, UPS and DHL. As a result, there is a scramble for reinvention and profitability.
Gene Del Polito, president of the Association for Postal Commerce in Washington, D.C., doesn’t think studying mail delivery in other countries will help the U.S. despite Postmaster General Patrick Donahoe’s dire warning that the USPS is “on the brink of default.”
“I don’t think there are great lessons to learn from Europe,” he said. “The U.S. Postal Service is a mess. Nobody in the private sector in his right mind is going to want to buy this thing.”
The U.S. Postal Service ran a deficit of nearly $10 billion in the fiscal year that just ended. Insisting they desperately need to cut costs, postal officials have called for ending Saturday delivery, layoffs of 120,000 workers and warned 3,700 communities that their post offices may be closed.
Cliff Guffey, president of the American Postal Workers Union, which represents 220,000 employees, called the changes a “reckless assault on the Postal Service and its employees. Crushing postal workers and slashing services will not solve the Postal Service’s financial crisis.”
Guffey said Postal Service proposals would destroy collective bargaining rights for postal unions, remove postal workers from the Federal Employees Health Benefits Program (FEHBP), and separate USPS employees from federal retirement programs.
Part of the financial mess, he said, is the result of a provision of the Postal Accountability and Enhancement Act of 2006 that requires the Postal Service to pre-fund the healthcare benefits of future retirees. The mandate requires the USPS to fund a 75-year liability over a 10-year period and costs the USPS more than $5.5 billion per year.
Postal unions held rallies across the country on Sept. 28, opposing postal cutbacks.
Deutche Post makes it sound so easy, but Great Britain is just beginning its journey toward privatization that will take years, using Deutche Post as its model. Opposition is mounting from UK unions.
The aim of the British government is to take away its pension liabilities of $15 billion and sell the postal service to the highest bidder – even a foreign company – to raise the money required to invest in new technology and infrastructure.
“Nothing has been done yet in the UK. They are just preparing for it,” said Michael Crew, professor of regulatory economics at Rutgers University’s business school.
He predicted a dismal fate for the U.S. mail service if it doesn’t act soon. “Congress needs to get out of the U.S. Postal Service and privatize it before it collapses,” Crew said.
Rick Geddes, a management professor at Cornell University agreed.
“What’s going to happen? Congress will continue to kick the can down the road. At some point, there will have to be major reform,” said Geddes.