Postal plants to shrink, 28,000 jobs at stake

The Postal Service says plant consolidations begin this summer.

WASHINGTON (CNNMoney) -- The U.S. Postal Service announced on Thursday it's moving forward with a $2.1 billion cost-savings plan to consolidate postal plants over the next two years, with consolidations starting in July.

The cuts will be limited in 2012, with 48 plants slated to be consolidated or closed in July and August, which will only impact 5,000 employees. However, when the plan is fully implemented at the end of 2014, 229 plants will be consolidated or closed and 28,000 jobs will be gone.

To customers, the consolidation plans will mean slower mail delivery for the most commonly sent mail -- but not until 2014. Overnight service is being phased out, but agency officials say letters being sent locally should still just take a day through the end of 2013.

Even with the slower delivery, they say that 80% of first-class mail, which most consumers use, will continue to be delivered on time in 2012.

"These changes are a necessary part of the plan to reduce costs and return the Postal Service to financial stability," said Megan Brennan, chief operating officer for USPS.

Last week, the Postal Service announced it was pulling back on plans to close thousands of rural post offices, saying these post offices would instead offer shorter hours.

The Postal Service also reported a $3.2 billion loss for the three months of 2012 ended March 31, which was due to the recession, declining mail volume and a congressional mandate to prefund retirement health care benefits.

The health care mandate is a major liability for the Postal Service, which doesn't have the cash to make a $5.5 billion payment that's due in August.

Unions say the health care payments are the main cause of the Postal Service's financial problems and should be eliminated instead of plant closures and service delays, which could turn more customers away.

"The Postal Service's actions are the best evidence there is that union members must contact their U.S. representatives and urge them to address postal reform immediately, using the recently approved Senate bill as a starting point for discussion," said Cliff Guffey, president of the American Postal Workers Union.

The Senate plan would spare about 100 plants from consolidation. The House doesn't have such a measure in its bill, which the full House has yet to consider.

Senators called upon the House to move forward on legislation to save the USPS. The Senate plan, which passed last month, would allow the Postal Service access to $12 billion in overpayments in retirement accounts, while postponing health care retirement payments.

"It shouldn't come as a surprise that the Postmaster General is moving forward to reduce costs with the limited tools at his disposal," said Sen. Thomas Carper, a Delaware Democrat and one of the authors of the Senate bill. "Now it's up to the House to pass a bill."

However, the House isn't likely to tackle Postal Service legislation until this summer at the earliest.

The list of 48 plants to be closed in July and August won't be released until later Thursday afternoon, postal officials said.

The Postal Service is, by law, an "independent establishment" of the executive branch. The agency doesn't normally use tax dollars for operations, but it has a $12 billion loan from Treasury to stem the tide until it can get back in the black.