US Postal Service Loss Widens To $3.3B

(Wall Street Journal) - The US Postal Service on Thursday posted a $3.3-billion loss for the latest quarter and projected it would run out of cash in October as its fiscal woes continued to deepen.

"Those losses cannot continue, or we will not be able to sustain the business," Chief Financial Officer Joe Corbett said.

The $3.3-billion loss in the October-to December quarter -- which included a $3.1-billion charge for mandated health care prefunding payments -- was 10 times as large as the loss in the same quarter a year earlier. The postal service also took a charge in the year-earlier quarter but didn't follow through with a payment, so the charge in the latest quarter doubled.

Declining volumes of first-class mail, the Postal Service's primary profit driver, also contributed to the loss in the latest quarter, which is typically the agency's most profitable.

Postmaster General Patrick Donahoe has proposed an overhaul that would allow the Postal Service to cut $20 billion in annual costs by 2015, but the agency requires Congressional approval to make many of those changes.

Closing as many as 3,700 post offices, ending Saturday delivery and allowing the Postal Service to withdraw from the federal health care system and create its own, are among the proposed money-saving moves.

Even if the agency is again allowed to postpone more than $11 billion in mandated health care prefunding payments, the Postal Service will still likely hit its $15 billion debt ceiling this year, and no longer be able to borrow from the Treasury, Corbett said.

If it does hit this borrowing limit, and can't find other sources of revenue or cost savings, it could delay payments to vendors, and then workers. As a government agency, the Postal Service can't file for bankruptcy protection, and taxpayers are ultimately on the hook.

By timing payments, Corbett said, the agency should be able to weather a cash shortfall of a few weeks without interruption to service. But if a slowing economy causes revenue to decline more than expected, the Postal Service will have to make more difficult decisions.

Corbett said an organization as large at the Postal Service -- it employs more than 500,000 workers -- should have about $7 billion in available liquidity, but the agency often operates with far less of a cushion.

Read more: Wall Street Journal