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U.S. Postal Service Rescue Bills Wouldn’t Work, Donahoe Says

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Nov. 21 (Bloomberg) -- The U.S. Congress should rewrite the measures it’s proposed to save the Postal Service as they wouldn’t allow enough cost reductions, Postmaster General Patrick Donahoe said.

“If passed today, either bill would provide at best one year of profitability and at least a decade of steep losses,” Donahoe said today in a speech at the National Press Club in Washington. “By taking the best of both the House and Senate approaches, Congress can provide the Postal Service with the legal framework and the business model it needs.”

The U.S. Postal Service, which forecast a record $14.1 billion loss for the 2012 fiscal year, might be profitable by its 2014 fiscal year if Congress makes all changes the service wants, including the elimination of Saturday mail delivery, Donahoe said.

The service’s mail volume has fallen more than 20 percent since 2006 as customers have shifted to electronic communication and the U.S. economy slipped into a recession. The Postal Service has said it doesn’t expect the volume of first-class mail, its most profitable type, to rebound.

The Washington-based service said last week it had a loss of $5.1 billion in the year ended Sept. 30 and would have lost more had Congress not given it more time to make a $5.5 billion payment for future retiree health-benefit costs.

Union Ideas

The service could save $20 billion over 10 years by adopting a new health-benefit plan for employees that uses Medicare as the primary coverage option, Fred Rolando, president of the National Association of Letter Carriers, said at a press conference today.

Congress should also end the requirement that the Postal Service pay in advance for future retirees’ health benefits as it “has already set aside enough money to fund retiree health benefits for decades,” he said.

The Washington-based union last month said it had hired Lazard Ltd. and former White House auto adviser Ron Bloom to come up with ideas to save the service. “I don’t have any details at this time,” Rolando said today about the work Bloom and Lazard are doing.

Bloom said in an interview that ideas from him and Lazard are coming “soon.” He declined to comment further.

The letter-carriers union and the National Postal Mail Handlers Union agreed yesterday to extend a negotiating deadline with the service on a new contract to Dec. 7. The letter-carriers group represents about 195,000 postal employees, the service said yesterday in an e-mailed statement.

The Postal Service is discussing restructuring options with potential advisers, according to people with knowledge of the matter. Officials have met in recent weeks with Moelis & Co., Rothschild and Perella Weinberg Partners LP, said the people, who declined to be identified because the talks are private. Postal Service Chief Financial Officer Joseph Corbett last week declined to comment on whether the service is in talks with the firms.

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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