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GAO-09-937SP 1 (2009-07-28)

handle is hein.gao/gaobabmjf0001 and id is 1 raw text is: HIGH-RISK SERIES Restructuring the U.S. Postal Service to Achieve Sustainable Financial Viability (New) Why GAO Is Designating This Area as High Risk USPS urgently needs to restructure to address its current and long-term financial viability. USPS has not been able to cut costs fast enough to offset the accelerated decline in mail volume and revenue-particularly costs related to its workforce, retail and processing networks, and delivery services. To achieve financial viability, USPS must align its costs with revenues, generate sufficient earnings to finance capital investment, and manage its debt. USPS's Financial Results and Projections, Fiscal Years 2006 through 2010 Dollars in billions Fiscal year Net income (loss) Year-end cash Year-end debt 2006 $0.9 1.0 2.1 2007 (5.1) 0.9 4.2 2008 (2.8) 1.4 7.2 2009 (projected) (7.0) (1.0) 10.2 2010 (projected) (7.0) (4.5) 13.2 Source: USPS. Note: Cash projections assume cost savings of $5.9 billion in 2009 and $8 billion in 2010 and no relief from retiree health benefits payments. Mail use has been changing over the past decade as businesses and consumers have moved to electronic communication and payment alternatives. Mail volume decline has accelerated with the recession, particularly among major users in the advertising, financial, and housing sectors. Mail volume has typically returned after recessions (see figure), but USPS's 5-year forecast suggests that much of the recent volume decline will not return. Quarterly Changes in Total Mail Volume, Fiscal Year 1989 through March 2009 Percentage 6 4 2 0 -2 -4 -6 -8 -10 -12 -14 -16 0 '4' o4)~ Fiscal year Recession periods Sources: USPS (mail volume); National Bureau of Economic Research (recession periods). Action is needed in multiple areas, including possible action and support by Congress; no single change will be sufficient to address USPS's challenges. The short-term challenge for USPS is to cut costs quickly enough to offset volume and revenue declines, so that it can cover its operating expenses. The long-term challenge is to restructure USPS operations, networks, and workforce to reflect changes in mail volume, revenue, and use of mail. United States Government Accountability Office

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