Postal Service Shrinking More Slowly This Year

Mail volumes and the number of postal workers will shrink more slowly this year than in 2009, the U.S. Postal Service predicted today.

"The rate of decline in total mail volume has slowed, but we do not anticipate improvements for several more quarters," the USPS said in its quarterly report to the Securities and Exchange Commission. "We expect advertising mail to stabilize and slightly increase as the economy improves."

The Postal Service's cost-cutting efforts include a plan to reduce work hours "by approximately 90 million" in the fiscal year that will end Sept. 30, which is less than the 115-million hour reduction in the previous fiscal year. One challenge to further cost reductions in general and the workforce in particular is the growth of delivery points. About 1 million new addresses have been added in the past year.

From October to December 2009, the number of mail pieces declined 9% and revenue declined 4% from the year-earlier period, the report said. That was an improvement from the previous 12 months, when volume declined 13% and revenue 9%.

Helped by a 9% reduction in career employees during calendar year 2009,USPS's cost reductions finally kept pace with its revenue declines. As a result, it lost "only" $263 million in the most recent quarter, versus a $380 million loss for October-December 2008.

But the fact that the Postal Service lost money even in what is usually its busiest quarter shows just how dire its financial situation is.

"Revenue is expected to continue to decrease in 2010 and, even with substantial cost reductions, our 2010 net loss is projected to be over $7 billion," the report said. Most of that projected loss is a $5.5 billion payment to a retiree-benefit fund that is nothing more than an accounting trick to make the federal deficit look smaller.

The Postal Service is scheduled to reveal next week its proposal to deliver mail one less day per week. But that won't have much impact on the current fiscal year.

"No significant savings are anticipated for 2010 from the proposed ability to adjust the six day delivery requirement, even if granted sometime during 2010, as multiple operational, contractual, and customer issues will need to be resolved before actual implementation of a five day per week delivery schedule," the report noted. "However, such important new flexibility could provide direct cost savings beginning in 2011."

Related articles:

• Mail Volumes Have Declined Faster Than The Postal Workforce, But That Might Change: More on the USPS' drastic cutbacks last year.
• How USPS Could Bypass Congress on Saturday Delivery: Explains the bogus overfunding of a retiree healthcare account and how the USPS could go to five-day delivery without Congressional approval.

International Paper Puts $2 Billion on Its Black Liquor Tab

Studying the fine print of tax legislation helped International Paper earn more than $2 billion last year in black liquor credits from the federal government.

The giant paper and packaging company announced today that it is getting $516 million in “alternative fuel mixture” credits for the 4th Quarter of 2009 and yet lost $101 million during the quarter. For the full year, IP got $2.06 billion from the government for mixing a bit of diesel fuel into its black liquor, a pulp byproduct, and using the mixture to power its pulp mills. Without the credits, it would have had a net loss of $1.4 billion last year.

IP kicked off the black-liquor craze in the U.S. pulp and paper industry a year ago when it revealed that it was exploiting a loophole in a federal highway bill. The law, which expired on Dec. 31, was intended to subsidize the use of bio-fuels in motor vehicles, but IP realized the subsidies could also apply to the decades-old practice of using energy-rich black liquor as a fuel source for kraft pulp mills.

Within a few months, all publicly traded companies with U.S. kraft mills were earning the credits. Most have not reported Fourth Quarter numbers yet, but they are on pace to receive more than $6 billion for 2009. With about one-fourth of the country’s kraft capacity owned by privately held companies, the total black-liquor tab for 2009 is likely to surpass $8 billion.

As we’ve noted before, we suspect Democrats in Congress left the black-liquor loophole open as part of a deal to help healthcare legislation. If so, they spent billions of taxpayer money and didn’t even get “two aspirins and a Band-Aid.”

Related Articles:

• Black Liquor Scorecard: $4.7 Billion Through September: An analysis of black-liquor credits earned through the 3rd Quarter of 2009 by the 21 publicly traded owners of U.S. kraft mills.
• Did Black Liquor Credits Pave the Way for Healthcare Legislation? 
• Environmentalists Try To Put a Cork Into Black-Liquor Loopholes: A coalition of 27 environmental groups wants to make sure that “Son of Black Liquor” is never born.

Newspapers Are Greener Than Web News, Says Environmental Expert

Which is greener, getting news online or reading a newspaper? For environmental expert and activist Sarah Westervelt, the obvious answer is the printed newspaper.

“It doesn’t take electricity to read my paper,” she said in a video posted recently at PBS' Mediashift site. “I’m too informed about what’s going to happen to my computer when I’m done with it and too concerned about that” to rely on the Web for news.



“I try to rely on the really good bio-compatible materials that have been around a long time,” said Westervelt, who as e-stewardship director at the Basel Action Network has done much to expose the bogus “recycling” of toxic wastes from discarded electronic gadgets.

“If everybody stops reading newspapers then perhaps we stop growing trees,” Westervelt said during the video, which was taken from a discussion sponsored by USC Annenberg's Specialized Journalism Program. Among other participants in the discussion were the production directors of the San Jose Mercury News and Chronicle Books.

Westervelt didn’t claim that everything about printing and paper is environmentally friendly, noting that trees for paper are sometimes grown on single-species plantations. But those issues pale in comparison with the many toxic materials and “15 different plastics” typically found in computers, she said.

Unlike paper, computer components do not lend themselves well to recycling and reuse because “you have this really complex waste combined with not enough value in the materials to pay for responsible recycling,” Westervelt said.

“So what we have is companies that are presenting themselves as recyclers and really what they are is waste brokers. They are just consolidating, loading up shipping containers and it goes off to China or India or Pakistan. And it’s just having absolutely horrific impacts in a lot of these developing countries to both human health and the environment.”

For a briefer and more light-hearted defense of printed newspapers against the digital onslaught, check out this video of a male a capella quartet doing a fabulous take-off on Gnarls Barkley’s “Crazy”, with lines like "Does that make us crazy? Wanting you to read."

And, yes, this blogger does check his facts twice.

Related articles:

• Smackdown: Printed Editions vs. Digital Editions: A look at the environmental impact of Dead Tree editions (ink on paper) versus Dead Dinosaur editions (digital content read on devices containing 15 different petrochemical-based plastics).
• The Greenwashing Media Award Goes to . . .: Vendors of digital-publication software have made some bogus claims about the environmental friendliness of Dead Dinosaur editions.
• Green Publishing Quiz: Test your knowledge, and your misconceptions, about environmentally friendly publishing.

Donnelley May Come Calling, But Will Worldcolor Answer?

The proposed deal for Quad/Graphics to buy rival printer Worldcolor makes it difficult for another bidder to step in, though stock analysts predict R.R. Donnelley will try.

The Quad-Worldcolor agreement says neither company can encourage a competing proposal or “knowingly participate in any way in discussions or negotiations with, or furnish or disclose any information . . . in connection with any Acquisition Proposal.” The one exception: if one of the companies receives a proposal that its board of directors deems better than the proposed Quad-Worldcolor deal.

That means Donnelley or any other suitor would have to make a superior bid without having the intimate knowledge of Worldcolor that Quad executives no doubt have gained the past few months. Donnelley has plenty of people who worked for Worldcolor’s predecessors, but they lack up-to-date information on customer negotiations, labor contracts, capacity utilization, and other important areas.

Stock analysts at RBC Dominion Securities praised the proposed deal but said Donnelley could top it, reports Andrew Willis of the The Globe and Mail of Toronto. They said Quad’s proposal for Worldcolor values it at up to $13.70 per share but that Donnelley could bid more than $15 per share “and still have a deal that makes economic sense,” Willis reported.

RBC noted that Donnelley competes with Worldcolor in more businesses than Quad does (such as telephone directories and short-run publications), creating more potential synergies from a Donnelley purchase of Worldcolor. Donnelley made three attempts last year to buy Worldcolor’s predecessor, Quebecor World, but that was complicated by Quebecor’s bankruptcy reorganization.

The RBC report was issued before the complex (118-page) agreement between Quad and Worldcolor had been made available on the Web sites of U.S. and Canadian securities regulators. The agreement indicates that Quad will establish a wholly owned subsidiary that will “amalgamate” with Worldcolor into a new company known as “World Color Press Inc” that will have its registered office in Montreal.

Don't read too much into that last statement. It says nothing definitive about what the parent company will be called or where it will be located. Perhaps it indicates that Quad will use the Worldcolor (brand name) and World Color Press (legal name) in Canada, where Quad is hardly known.

With the Quadracci family maintaining voting control of the new Quad, it seems likely that the headquarters will remain in Wisconsin.

"Quad is very invested in Wisconsin," Joel Quadracci, Quad's chairman and CEO, told the Milwaukee Journal Sentinel this week. "My hope is that we actually grow jobs in Wisconsin," Quadracci said, calling the company's five plants in the state among the company's most efficient.

Related Articles:

• Donnelley Takes Its Ball and Goes Home: After three tries in less than a month, Donnelley gave up on buying Quebecor World last June.
• Printing's New Odd Couple Leaves Some Questions Unanswered: There are still some unknowns regarding the proposed Quad-Worldcolor deal, which resulted from discussions between the two companies' contrasting CEOs.  

Intelligent Snail: USPS Finally Addressing Crossed-Out Barcodes

More than six months ago, published reports warned about a problem with Intelligent Mail barcodes — the practice of letter carriers crossing out the barcode on misaddressed mail. Today, the Postal Service finally got around to correcting the problem.

The January 28 issue of the Postal Bulletin includes an item called “Do Not Obliterate the Barcode” that contained the following:

“The Intelligent Mail® barcode contains important data that is used to provide mailers — including the Census Bureau — with information, such as when the mailing entered the mailstream and undeliverable or address correction information. But technology cannot reliably produce this information if it can’t read the barcode.

"That’s why the Postal Service™ is telling employees to make sure they don’t obliterate the barcode as mail moves through the system. Specifically, employees should not mark through, obliterate, or affix any labels over the Intelligent Mail barcode.”

It also included a reproduction of a poster (below) being used to brief employees on the issue.

Back in July, Monica Lundquist of Window Book Inc. published an item about crossed-out IMbs, and other Web sites subsequently did the same. I'm told that postal officials were made aware of the issue more than a year ago.

Lundquist described what typically happens when a letter carrier ends up with undeliverable mail: "When the carrier determines that the recipient is no longer at the address on the mailpiece, or that the mailpiece is otherwise undeliverable as addressed, the piece is sent to a Computerized Forwarding System (CFS) center for further processing. The CFS sites are where the ACS notices are generated. Before this is done, however, the mail carrier manually crosses out the barcode on the mailpiece so that the piece does not get re-directed to the old or bad address."

That's fine for traditional barcodes. But when it happens to Intelligent Mail barcodes, the Postal Service is not able to process the address correction in the Intelligent Mail program. Mailers using IMbs for address correction are reporting huge problems, which is one reason Dead Tree Edition has referred to full-service IMb discounts as The Postage Discount No Mailer Wants and to IMbs as FUBAR (Failed Unbelievably Bureaucratic Addressing Regulations) codes.

Lundquist noted the problem could be avoided by training letter carriers not to cross out IMbs. But she added, rather prophetically: "However, since there are tens of thousands of mail carriers across the country, the likelihood of this training getting accomplished quickly and thoroughly is not very high."