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® Pla n t o Profit a bilit y 5 Y e a r Busine ss Pla n February 16, 2012 Introduction  The United States Postal Service (“USPS”) continues to endure the negative effects of electronic diversion combined with a weak economy and increased funding obligations  This confluence of events has had financial impacts on the organization which have become untenable  While the USPS has continuously sought to make operational improvements and improve efficiency, the organization’s current financial position requires additional action to ensure viability and self sufficiency  The following presentation has been prepared by the USPS in order to communicate its business plan (“Business Plan”) to key stakeholders…show more content…
Fixed cost base  Transactional volume declining due to e-diversion  Advertising mail is subject to more substitution options  Mail volume highly sensitive to economic changes  Mail mix changes – lost profit contributions These trends will continue to put pressure on USPS’s ability to provide affordable universal service Price Labor Costs  ~80% of total costs  COLA increases  Benefits: pensions,  Capped by inflation  Price elasticities are in flux due to growing alternatives Rising but capped Rising cost per hour retiree health, health insurance  Limited flexibility February 16, 2012 4 Electronic Diversion is the Primary Driver of First-Class Mail Volume Decline  Diversion of communication and commerce to electronic channels is a principal contributor to declining First-Class Mail volumes  Diversion reflects a permanent secular shift in customer behavior and is more pronounced during periods of economic weakness  First-Class Mail represents 44% of mail volumes and 66% of contribution  Diversion exacerbates the loss of profit as revenues decline The Economy is NOT the Main Cause of Diversion 180% 160% 140% 120% Recent Examples of Diversion  Alternatives to bill payments by mail  Online presentment of bills and statements  E-mail as a substitute for mailed correspondence Index  E-file of tax returns 100% 80% 60% 40% 20% 0% Loss of 45 bn pieces  Electronic

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