Postmaster General Louis DeJoy is banking on wide-reaching service cuts and targeted new investment to save the nation’s embattled mail service $160 billion over the next decade. He’s also intent on resetting expectations.
DeJoy’s “Delivering for America” plan, released Tuesday, includes longer delivery windows, reduced post office hours and higher postal rates. It also features significant commitments to new infrastructure, such as package sorting machines and a new delivery fleet. The postal chief also is looking to Congress to pass legislation that would free the U.S. Postal Service of its prefunding mandate for retiree health care, which costs nearly $5 billion a year.
DeJoy and Ron Bloom, who chairs the agency’s governing board, discussed the plan and what it will mean for consumers and large stakeholders, such as its unionized workforce and industrial mailers, in an interview Tuesday with The Washington Post.
Questions and answers have been edited for length and clarity.
Q: The basis of this plan is the Postal Service has to reset expectations. It can’t afford to keep doing the same thing and losing money, and it can’t afford to set service standards that it’s not hitting. But at the same time, there’s a lot of folks that aren’t going to get that message. So how do you sell that message that we need to change expectations, and the Postal Service can’t be what it has been previously?
DeJoy: You’re seeing that process happen. It’s been happening since I got here working with the board. And we’re trying to put the focus on growth here, which is what this plan is about. I think the Postal Service has missed an opportunity to position itself to get a bigger share of the package market and has been facing the declining mail market, driving up cost and not being able to achieve the service standards that it’s put in place. So we’re taking this show on the road like we did today.
It was not a good time here to be trying to do this type of effort. We had the pandemic, peak season, the election, but everybody kept their heads down, and went forward with a plan that is very doable, created by many, many long-term postal employees that have the genetic makeup to serve the American people. I basically asked them, “We need to design an organization, a service, that we want to see in the future, that serves the people and covers its cost. That’s the law. It’s very firm on six days a week, 160 million addresses, and we have to balance the books. Help me get there.” And they went to work, and together with the board, we came up with what I think is a realistic, achievable and an exciting plan.
Bloom: When we talk about setting expectations, we’re talking about cutting employee turnover among new employees in half. That’s an expectation of a better place to work. We’re talking about an irrevocable commitment to six- and seven-day delivery. That’s an expectation that the Postal Service hasn’t had. We’re talking about setting an expectation of $40 billion back into the organization; $24 billion of growth. We’re talking about, with congressional support, electrifying our fleet. Those are the expectations that we’re prepared to put on Louis and that he’s prepared to drive in the organization. That’s what we mean by setting new expectations. Now there has to be some adaptation in our networks to make it work given these changes, but the real change, the real expectation that’s new and different in this plan, is the stuff I just talked about.
Q: Well, there is another aspect of that, which is the service standard and the price. How do you sell that to your stakeholders? Isn’t less service or slower service for a higher price, isn’t that a business issue and not just a reputation issue?
DeJoy: We are, in many ways, frozen in legacy-type thinking and not recognizing the reality of a situation where we are. First of all, we’re planning to lose $160 billion. We lost $10 billion last year. Mail volume’s been down 45%, and it’s projected to go down another 35% over the next 10 years. We can be running trucks around the country with two pieces of mail on it to make our service standards. Seventy percent of the mail is not being affected. Another 20% gets an extra day, and another 10% gets an extra day from there. So relatively speaking, in the longer service standards, these are on the longer transportation routes cross-country.
And then our service in the package market is going to accelerate. So when you look at it 10 years from now, when we get our volume up, a much higher percentage of our mail delivery will be same-day, one-day, two-day type of velocity, which is what the American people want when they use us. This is following how the American people use the mail and we are making refinements to get some cost out of here.
In regard to pricing, we have not equitably raised our prices over the last 14 years. We’re trapped in the frozen business model from 2006, while mail volume — the basis that these equations were based on — the denominator’s been cut in half and we had no adjustment for that. We believe we will continue to provide affordable prices for the American people. And we will use the pricing judiciously.
Bloom: We’re losing $10 billion a year. The Postal Regulatory Commission studied it to the Nth degree and told us that we had not been allowed to give prices that reflect our cost. So now in market-dominant products, they’ve given us permission. It’s not our decision. It’s their decision. They’ve given us permission to have prices reflect the greater portion of our cost. I don’t see how anyone in the world would think that for 10 years we’re not going to need to adjust our prices, given the reality of our financial circumstance and the reality of what’s happening to mail. Obviously, everyone would like prices to be flat forever. I would, too. But that’s not a realistic expectation for an organization that’s losing this kind of money.
Q: Do you know what the new prices by product will be?
DeJoy: You could read the PRC ruling. I can’t tell you what the price increase would be. There’s a process for that, and we have to do a filing and get board approval. But if you study the PRC ruling and regulations, you could figure out what our potential ability is there.
This plan is refining for lack of evolvement over the last 14 years and planning for where we want to be 10 years from now. And we do not believe that any of these changes that we are proposing or moving forward on are hugely impacting or changing the structure and the service of the of the Postal Service. We’re still delivering six days a week. That’s 160 million addresses. That’s a lot of miles every day. And that’s also where the opportunity is, because we want to deliver more to the American people, and that’s really what this plan is focused on. The strength of the organization is our delivery system, our retail network, 31,000 sites across the country, our carrier base: Several hundred thousand carriers go into neighborhoods, in uniforms and nicely presented. That’s what we want to capitalize on, and we think we can. Part of it involves stabilizing our workforce. We know that there are headwinds, but we’re prepared, we’re committed, and we think we have the logic and science and the analysis to define what we want to be, how we best serve the American people going forward.
Bloom: For context, we’re not getting rich on this plan. Our aspiration is to break even. Our aspiration to do what Congress told us to do, which is live within our means and reinvest in the organization. That’s all we’re trying to do.
Q: This plan is based on the projection of package growth year over year. What have you learned that leads the Postal Service to believe that packages will grow at that rate, 6 to 11% year over year through 2025, especially with firms like Amazon, like FedEx building out their own delivery networks?
DeJoy: We’ve learned a lot. The projections are economists’ projections that we use. We’ve learned that especially through the pandemic, the American people want to use the mail to ship packages. I mean, our volume was way up. We also learned that a big part of our infrastructure was not set up for it, and a big part of our infrastructure was the best at it. When you look at all the service issues that were in our network — that means ground transportation, air transportation and so forth — but if we got mail and packages to our delivery unit, even at the height of the pandemic, in the height of peak season, if it got to our delivery units, we delivered at like 97% of the time within a day.
Q: What makes you think that those consumer habits will endure?
DeJoy: That growth is pretty standard assumption across the industry. And we have some concepts that we’re introducing within our local communities to bring Main Street businesses back to the mail system. We have to position ourselves to continue to assist and inspire the use of the mail system, and it’s already happening. And what we think it will continue to happen as the economy continues to evolve and our service inspires more use.
Q: So in that vein, is there a goal in terms of market share in package delivery the Postal Service wants to attain by 2030, for example?
DeJoy: I’m not out to capture the whole market. We’re out to fill our network. We’re out to get more packages on our carriers, get more packages in our trucks. We’re talking additional pieces per delivery. And by doing that, we make a good financial contribution from packages to our overall system. Right now, we deliver about 35% of the packages to households across the nation. I think we should be higher than that. We’re the United States Postal Service. We started doing it a long time ago. We ceded some of our market share. But FedEx and Amazon and UPS, many of those are our partners in that we do business with them and also give them some of our network business. We are the most trusted brand. I just want to become the most used brand now when it comes to packages.
Q: A key part of this plan is stakeholder buy-in. But, Mr. Postmaster General, you know this from your very successful days in the private sector, that that’s not always how business decisions get made. Why are you confident that this plan, which does ask stakeholders to make their contributions, will keep mail in the system?
DeJoy: I’m not competing for a change in medium. I can’t stop electronic communications. What I can do is recognize that I can’t stop that. That’s kind of what we’ve done here. I’m not chasing mail volume down because I’m going where we see growth. That’s what we need to do. That’s what we could have done a better job of in the past and we would be better positioned for it now.
Honestly, many of the things we’re rolling out have been on the table before. It’s just the organization, we didn’t have a board for a while. We just didn’t have the fortitude to move these things forward. Now we’re there. We’re on it. We’re running. We’re moving. Many of these things are already underway. We’re working with the Congress to get the legislation. But once you get past that legislative component, the other pieces of the plan are in our court, and we’re moving forward with them. And we have a high confidence that they’re going to be successful.
It’s an exciting place to be at now, the Postal Service. We look at our stakeholders, our union leadership is mostly supportive of what it is that we intend to do. That’s a big stakeholder. And I think the package industry, big shippers will get behind us as they see what we’re trying to do. And then, you know, mail; it’s unfortunate I’m not a magician. I can’t create the need for mail.
Bloom: At the end of day, the most important stakeholder is the American people, and this is about delivering for the American people. And we think when they figure out what we can offer them and how we can offer them affordable, reliable service, we think American people are pretty excited to see their Postal Service revitalized.