(Bloomberg)—President Donald Trump ordered the creation of a task force to review business practices at the United States Postal Service, a move that could affect one of the president’s favorite corporate targets: Amazon.com Inc.
The Postal Service has lost more than $65 billion over the past decade as Americans increasingly transmit messages online, according to the executive order. Facing this sharp decline, USPS came to the realization that its future relies on hitching a ride with e-commerce’s growth and exploiting the key advantage it has over UPS and FedEx—it visits 156 million U.S. residence and business addresses six days a week and, in some cases, seven.
Amazon, No. 1 in the Internet Retailer 2017 Top 500, is now the Postal Service’s largest parcel client. In the Internet Retailer 2012 Top 500 Guide, 90 retailers listed the Postal Service as their primary shipping carrier, representing $64.46 billion in online sales. Four years later, 120 retailers representing $132.26 billion in sales listed USPS as their primary carrier. For comparison, 193 retailers listed UPS Inc. as their primary carrier and 144 listed FedEx Corp. (Not all retailers share carrier information.)
“The USPS is on an unsustainable financial path and must be restructured to prevent a taxpayer-funded bailout,” the president said in an order that was released Thursday night. The order calls for an examination of the Postal Service’s pricing, policies and workforce costs. The task force will be led by Treasury Secretary Steven Mnuchin or his designee, according to the order.
In a series of Twitter messages, Trump has accused Amazon of draining the Postal Service of money it can’t afford to lose. Trump’s sustained attacks on one of the world’s-largest companies have hurt Amazon’s stock price and raised questions about government interference in the private sector.
A White House official said the presidential order was intended to come up with solutions to the problems at the Postal Service. The official didn’t deny that the task force’s recommendations could affect Amazon. A second White House official disputed the notion that the order was directed at Amazon and also said that the task force was charged with improving the mail service.
Both officials were granted anonymity, to discuss administration deliberations.
Amazon declined to comment.
Trump has claimed that Amazon was “costing the United States Post Office massive amounts of money for being their Delivery Boy,” a situation that puts “many thousands of retailers out of business.” He repeated a claim that the postal service loses “$1.50 on average for each package it delivers for Amazon” and said “only fools, or worse” believe the Postal Service makes money from doing business with Amazon.
Amazon’s founder, Jeff Bezos, also owns the Washington Post, which has aggressively covered the Trump administration.
Since signing a landmark five-year contract in 2013 to deliver packages on Sundays, Amazon and the Postal Service have declared their business relationship a success, although the terms of the contract are confidential.
‘Last mile’ of delivery
The Postal Service says it makes money on the Amazon deal, and it’s legally prohibited from charging shippers less than its delivery costs. E-commerce revenue provides “essential support to pay for the network and infrastructure that enables us to fulfill our universal service obligation,” David Partenheimer, a spokesman for the Postal Service, wrote in a January op-ed. “All users of the mail benefit.”
Amazon regularly uses the Postal Service to complete what’s called the “last mile” of delivery, with letter carriers dropping off packages at some 150 million residences and businesses daily. The e-commerce giant has a network of 35 “sort centers” where customer packages are sorted by ZIP code, stacked on pallets and delivered to post offices for the final leg of delivery.
“Amazon has the money to pay the fair rate at the Post Office, which would be much more than they’re paying now,” Trump said to reporters at the White House earlier this month. “Amazon is going to have to pay much more money to the Post Office, there’s no doubt about that.”
The executive order requires the commission to examine “the expansion and pricing of the package delivery market and the USPS’s role in competitive markets.”
It’s not clear what effect the task force would ultimately have, since most changes to the Postal Service’s business structure would require new legislation. The Postal Service is an independent organization and its mail rates are set by a commission.
The task force will be looking at issues that have been studied for years by multiple government bodies that have already issued recommendations and reports focusing on the financial stability of the Postal Service.
For example, Trump’s executive order requires the task force to review the definition of the “universal service obligation,” which is a loosely defined mandate for the Postal Service to provide affordable service to all customers.
The Postal Service’s Office of Inspector General issued a report in 2014 with recommendations for redefining the obligation in the digital age. In 2016, the same office released a report with recommendations for financing the mandate.
The task force will be required to submit a report to the president within 120 days with recommendations for “administrative and legislative reforms,” according to the order.Favorite