35,000 Postal Service jobs on the chopping block

Postmaster General Patrick Donahoe said the closing of 223 plants nationwide will impact 35,000 jobs.

WASHINGTON (CNNMoney) -- The U.S. Postal Service announced on Thursday new plans to consolidate or close 223 mail processing plants, putting 35,000 jobs at stake starting in late May or June.

The move would save $2.1 billion and is part of the agency's broader effort to save $20 billion in the next three years.

The Postal Service is in debt due to declining first-class mail volumes and a congressional mandate to prefund retirement health care benefits.

The agency was reaching out to employees on Wednesday, officials said. Not all of the workers affected by the plant closings will lose their jobs. Many will be offered posts at other processing plants miles away or even in other states. Some will be urged to retire.

"This is an important part of the network consolidation," Postmaster General Patrick Donahoe said in an interview with CNNMoney. "Some employees will retire. A mail clerk may want to become a letter carrier. We know how to move people and find landing spots."

The plant consolidations are the latest in an array of controversial cost-cutting measures under consideration at the Postal Service. Also on the table are slashing Saturday service,delaying delivery of some first-class mail, closing post offices and hiking the price of a first-class stamp by a nickel to 50 cents.

The Postal Service says that it faces $18 billion in losses by 2015 if nothing is done.

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The agency can't close any facilities until May 15, after the moratorium on closures ends. The Postal Service originally agreed to the moratorium to give lawmakers time to pass legislation to save the agency. But so far, those efforts have been slow-going.

Donahoe said he would like to complete most of the consolidations, including job cuts and changes to 30,000 full-time positions and 5,000 non-career employees, by Oct. 1.

Under the plan, nearly every state would lose a mail processing plant, according to the Postal Service list, which includes 14 in California, 12 in New York and 9 in Illinois.

Mail processing plant closures can yield a particularly devastating toll on communities. A plant in Tulsa, Okla., slated to be consolidated employs nearly 600 employees.

Systemwide, the Postal Service employs 150,000 employees at 461 processing facilities.

The Postal Service will give employees 120 days notice before their jobs are cut or moved, Donahoe said. Employees eligible to retire may be offered an incentive package.

"This is a disaster -- not just for postal workers. It's a disaster for the American people," said Sally Davidow, spokeswoman for the American Postal Workers Union, whose members will be particularly impacted. "Cutting the Postal Service's mail processing network is not the solution to its problems."

The unions have decried moves to cut Saturday delivery, downsize networks, slow delivery and cut jobs. (Why Congress can't save the Postal Service)

They point out that almost all of the $3.3 billion in red ink the Postal Service recorded in the most recent quarter resulted from the $3.1 billion owed for future retiree health benefits. The union wants Congress to dispense with the 2006 mandate that required prefunding those benefits.

Most of the plants on its initial list of 264 plants up for closure needed to be closed. Only 35 on that original list up for closure ended up surviving as is, and six more will be studied further.

Separately, the agency is also studying some 3,700 post offices for possible closure.