Postal Service faces "new reality," pitches cuts

Updated at 1:07 p.m. ET

WASHINGTON - In announcing the "new reality" it must face, the financially troubled Postal Service said Thursday it may close more than 250 mail processing facilities across the country and plans to reduce service standards for first-class mail in an effort to cut costs.

Such a change would mean that a letter mailed with a first-class stamp would take longer to arrive at its destination, increasing delivery time from a minimum of one day to two days, the service said.

The steps are part of a broad effort to cut costs for the agency that lost $8.5 billion last year and is facing ever more red ink this year as the Internet siphons off the lucrative first-class mail and the stagnant economy holds down the growth of advertising mail. Over the last five years mail volume has declined by more than 43 billion items.

"We are forced to face a new reality," Postmaster General Patrick Donahoe said in a statement. "First-Class Mail supports the organization and drives network requirements. With the dramatic decline in mail volume and the resulting excess capacity, maintaining a vast national infrastructure is no longer realistic."

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Postal officials said 252 mail processing facilities across the country will be reviewed over the next three months for possible closing. Currently there are 487 such offices. That's in addition to about 3,700 local post offices also being reviewed for closure. Closing the mail-processing facilities could affect 35,000 workers.

In addition, the agency said it plans to reduce current delivery standards for first-class mail. Such mail is now supposed to be delivered in one-to-three days depending on how far it has to go. That will be changed to two-to-three days, meaning mailers could no longer expect next-day delivery in their local community.

Officials said that could have some impact on commercial mailers but individual customers are not likely to notice the change. They promised to work with businesses to help solve any problems the change might cause.

The closings and service changes could save the post office as much as $3 billion annually and are part of an effort to reduce annual costs by $6.5 billion. Other savings are being sought through requests that Congress allow the post office to eliminate mail delivery on Saturdays and change or eliminate an annual $5.5 billion payment the post office is required to make into a fund to cover future retiree medical benefits.

Last year the Postal Service had revenue of $67 billion and expenses of $75 billion.

"Cutting costs is essential to saving the Postal Service and the 8 million private sector workers whose jobs rely on it," said Art Sackler, coordinator of the Coalition for a 21st Century Postal Service, an industry trade group. "The Coalition welcomes this important step and looks forward to the details. But what's needed even more are fundamental reforms only Congress can make."