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Delivery Cuts Only 'One Step' To Fix Finances: Postmaster General

Wednesday, 6 Feb 2013 | 11:32 AM ET
USPS to End Saturday Letter Delivery
Patrick Donahoe, Postmaster General & CEO, explains why the agency is stopping Saturday mail delivery in an effort to cut costs, and why doubling the postal rate is not the answer.

Ending the Saturday delivery of mail is "just one step in a plan to resolve our finances," Postmaster General Patrick Donahoe said in an interview on CNBC. "Going forward we still need legislation to address a number of things."

Donahoe said that this move is necessary due to dropping use of first class mail service. The U.S. Postal Service announced Wednesday that it will stop delivering mail on Saturdays but continue to deliver packages six days a week under a plan aimed at saving about $2 billion annually.

"Our cash situation is much better now and these changes will help," Donahoe said, "The key for us is legislation and working with Congress to get these issues resolved."

"This is a responsible action by the post office," said Rep. Darrell Issa (R-California) told CNBC after the announcement. Issa has proposed legislation in the past aimed at keeping the postal service solvent.

USPS: Why Stop Saturday Service?
CNBC's Hampton Pearson has the latest details on the agency's decision to halt delivery on Saturdays. And, Rep. Darrell Issa, (R-CA), weighs in with his thoughts on the restructuring plans and whether the postal service should be private.

The USPS "has an obligation to break even," Issa said, "and [Congress] has stopped them from that for a long period of time. We need to do just the opposite."

Donahoe said there was "a lot of opportunity for cost reduction," through resolving the health benefits for postal retirees and taking over their own health care plan. He estimates these measures could save USPS $7 billion.

Donahoe did not rule out selling real estate owned by the USPS. "In many cases, we have too much space, and sometimes it's better to sell it to someone else so they can re-purpose it." The agency already leases some space to private clients, he said.

"The key for us is to shrink the facilities down to the amount we need and dispose of the rest," he said. "We're very aggressively doing that."

Donahoe said he is limited by law from increasing stamp prices to generate additional revenue; the USPS can only increase prices according to the rate of inflation. He said that the stamp business currently has a good return on investment and believes that more of a price hike could drive away business.

"We have a five year plan and people know what direction we need to take. Any large business has to make changes when you're faced with issues like this. We want to get ahead of these issues and limiting the delivery schedule is one of the ways to do that."

— The Associated Press contributed to this report.

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from Squawk on the Street @ToscanoPaul