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Proposed USPS Alliance With FedEx Scrutinized By Cathy Newman The Postal Service expects to lose as much as $300 million this fiscal year, its first loss since 1994. In the past, rising mail volume has helped the agency cover its costs, but first-class mail volume is declining as people increasingly use e-mail. Rep. John M. McHugh (R-N.Y.), chairman of the House Government Reform subcommittee on the Postal Service, told an oversight hearing: "Let's not kid ourselves: The crisis is upon us." In the hopes of countering such challenges, the agency is discussing a strategic alliance with FedEx. Under the plan, described as "innovative" by McHugh, the Postal Service would deliver many FedEx packages around the country, while using FedEx's air transportation network to deliver priority and express mail worldwide. But the deal has drawn fire from competitors and lawmakers. Earlier this week, Rep. Henry J. Hyde (R-Ill.), chairman of the House Judiciary Committee, wrote to Assistant Attorney General Joel Klein asking him to "take a thorough look at the competitive issues raised by any such strategic alliance." Hyde said the deal raises "a variety of antitrust concerns." Postmaster General William J. Henderson said no agreement has been reached with FedEx. Jokingly using a marriage metaphor, he explained that "polygamy" is in this instance acceptable and that the Postal Service has not closed the door on similar deals with other partners, such as United Parcel Service Inc., which has promised to fight the alliance with FedEx. The agency's losses could have been much worse, Henderson said, had it not been for a "Herculean effort" to cut costs. "We could have entered this year with over one billion and a half in the hole. Fortunately we sensed that in time, and we've cut costs over a billion dollars," he said. But cost-cutting will not sustain the agency, Henderson indicated, and he urged Congress to allow the Postal Service to grow by adopting the kind of "substantive postal reform" other countries have embraced. New Zealand, Sweden and Finland have abolished their postal monopolies, and Germany will do so soon. Foreign postal administrations are "dumbstruck over the fact that the U.S., which is the leader in most every area in the world, for some reason is blind to the requirements of postal reform," Henderson said. Speaking to reporters later, he said he believes that the Postal Service will be privatized in the future. "In my own world, I think it's easier to run a private company than it is a quasi-government agency," he added. McHugh has drawn up a bill to modernize postal laws that would give the Postal Service greater freedom to compete but would also establish rules to ensure fair competition. He expressed concern yesterday that his bill, which would allow the agency greater flexibility in setting postal rates and would permit it to distribute profits as employee bonuses, might not be enacted this year. Henderson warned that it will be "very difficult" to break even next year, as bills and payments that have traditionally been mailed first class will increasingly be sent electronically. "I don't think it's if but when bill payments . . . migrate to an electronic platform," he said. Bills, statements and payments represent $17 billion of the agency's $60 billion annual revenue. Of the 880 million Social Security checks, tax refunds and other payments sent by the Treasury Department last year, 68 percent were mailed electronically, resulting in $180 million in lost first-class mail revenue, according to written testimony by the General Accounting Office. |