Donahoe Determined To Keep Postal Service Relevant

The U.S. Postal Service lost $8.5 billion last year. On Monday, President Obama endorsed a plan to reduce mail delivery to five days a week to cut its massive losses. Postmaster General Patrick Donahoe talks to Steve Inskeep about the future of the mail service.

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DAVID GREENE, Host:

It's MORNING EDITION from NPR News. Good morning. I'm David Greene.

STEVE INSKEEP, Host:

And I'm Steve Inskeep.

The U.S. Postmaster General started his career sorting mail. Patrick Donahoe still recalls handwritten Pennsylvania zip codes he used to decipher on envelopes.

PATRICK DONAHOE: Bethel Park 15102, Aliquippa, P.A., 15001, Pittsburgh itself starts with 152.

INSKEEP: Now Donahoe faces bigger numbers. Deficits that threaten the future of the Postal Service. He's asking Congress for permission to put off worker pension contributions and cut service. Saturday delivery would end. First class mail would take three days instead of two. Donahoe blames the economy and the Internet.

DONAHOE: Back in 2000, about five percent of Americans paid their bills online. Today it's 60 percent. And slowly but surely, that first-class mail volume eroded.

INSKEEP: We put out a call for questions on Twitter and Facebook and got a fair number of responses. People seem to be interested in this topic.

DONAHOE: Good. We love the fact that people are interested. It means people are very worried about us.

INSKEEP: Well, although some people are also skeptical. Here's a question. How will the proposed cuts help, since less service will drive more users to alternative tools?

DONAHOE: Here's the thing. People are already going to alternative tools. We've lost 60 percent of the bill payment to an online function. And that's what's in the blue mailboxes.

INSKEEP: Some people are also asking how much you intend to reduce the workforce of the postal service.

DONAHOE: We have been very judicious over the years. In the year 2000, we had about 804,000 employees - career employees. Today, we have about 555,000. So we've already reduced almost 250,000 people without any layoffs.

INSKEEP: Are you seeking to lay off people in the future or the authority to do so?

DONAHOE: I have brought it up to Congress's attention, that we may have to take measures in that direction. But it's an option.

INSKEEP: I ask this question because a question came in on Facebook, from a postal employee. Quote, "We have a no layoff clause, which is part of our most recent contract. The postmaster general has said that he will ask Congress to lift that clause. If that is his plan, then why was it included in the first place and agreed upon? Was that contract negotiated in good faith?" That's her question.

DONAHOE: The contract was negotiated in good faith. If you take a look at when we were talking about this, it was over a year ago that that proposal first hit the table. Things have changed dramatically within the last year. We've lost a substantially larger portion of first-class mail. And looking ahead, we don't see it coming back.

INSKEEP: You didn't see that coming, or you didn't see the decline coming so swiftly?

DONAHOE: We saw the first-class single piece, what we expected was once the economy settled and started turning around, which it did last summer - last summer and last fall we, in fact, had an increase in our mail volume. So we were starting to feel that things were settling and would start back in the other direction.

The key indicator for first-class mail is the employment numbers. And we thought, by now, we'd probably see, you know, six to seven percent, versus nine percent unemployment.

INSKEEP: Here's another question. Can you please ask the postmaster general how much stamps should cost to break even? It can't be 44 cents.

DONAHOE: Well, that's a question people ask all the time. People say, well, why don't you just raise the rates to 50 cents or a dollar. It's like anything else. You'll price yourselves out of business. The commercial market would walk away, and it would push people, I think, to move faster online than they are right now.

INSKEEP: Although, well, OK, online, there's an alternative. But if I think about FedEx or UPS, even if you doubled your stamp price, they'd be more expensive than that.

DONAHOE: Oh, yeah. Absolutely.

INSKEEP: You'd still be cheaper.

DONAHOE: Oh, FedEx and UPS, they're in a completely different market, though.

INSKEEP: So you're not even worried about them. You're worried about the Internet. That's your fundamental...

DONAHOE: The Internet is the absolute - that's the change. The technology change and the Internet - a good example is comparing first-class mail to film - Kodak and Fuji. If you think about 10 years ago, people argued who made the better film, Kodak or Fuji? Today, people say, what's film?

(SOUNDBITE OF LAUGHTER)

DONAHOE: That's what we worry about. So how do you manage in that world? And that's what we're trying to figure out.

INSKEEP: OK. That raises another question. Are you a business that has no future or very little future, a niche future at best, because that's what film is?

DONAHOE: No. We think we are a business that's got a very big future. Number one, there will always be a need for hard copy, no matter what. There will always be - unless somebody comes up with a real invention - a need to deliver packages. And we do both of those. And those are both growing areas.

We also think that there's a need for the postal service in the digital world. The digital world, right now - you know, bill payment, bill presentment, sending stuff through the Internet is the Wild, Wild West, truthfully. And I think that we will have a very interesting part to play there in the secure messaging environment.

INSKEEP: Secure messaging, meaning that you come up with some service whereby you can say this is a letter from my lawyer. This is a letter from my mother. And it's not a letter from spam. That's what you're saying?

DONAHOE: Yes. A letter from the doctor, a letter from your mutual fund or your stockbroker.

INSKEEP: Somebody else asked a question, maybe it was a bit of a trick question, but I'm interested. When was the last time you mailed a letter?

DONAHOE: Me?

INSKEEP: Yeah.

DONAHOE: Yesterday. I use the mail. I use the mail. I don't pay any bills online. And it would be terrible for the Postmaster General to be paying bills online.

(SOUNDBITE OF LAUGHTER)

INSKEEP: Postmaster General, thanks very much.

DONAHOE: Thank you.

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