FedEx hit hardest from Postal Service cuts

We reported earlier that the U.S. Postal Service is looking at a number of options to ease its falling revenue and budget cuts. The service spends about $15 billion annually on products and services and is looking to its more than 20,000 suppliers to help with $1 billion in annual cost cuts, according to Bloomberg. The traditional mail service is quickly becoming antiquated in today’s digital age and there seems to be a number of major American businesses that will feel the effect if and when the Postal Service closes up shop.

On Sept. 15, Postmaster General Patrick Donahue is supposed to announce a plan to eliminate mail processing facilities and cut transportation and machinery costs. The service has already asked Congress to let it delay a $5.5 billion payment for future retiree health benefits and shift what overpayments to federal pension funds to cover the payment. Saturday mail delivery is also on the chopping block and would cut 220,000 jobs by 2015 and close 3,700 post offices.

“It’s becoming more competitive to do work for us and it’s going to have to be done at slimmer margins from a standpoint of our supplier base,” Chief Financial Officer Joseph Corbett said in an interview. Corbett said he wants to cut at least $1 billion a year from supplier spending.

Companies at risk of losing postal revenue range from Northrop Grumman Corp. and Siemens AG, which supply sorting equipment to the USPS, to FedEx Corp., to closely held trucking company Pat Salmon & Sons.

FedEx may be taking the largest hit as it’s the Postal Service’s largest supplier, receiving $1.4 billion in the 2010 fiscal year. FedEx receives about 3.5 percent of its revenue from the Postal Service and most of it comes from a seven-year $1 billion annual contract to fly approximately 4 billion pounds of mail per day until 2013. However, FedEx will still be employed to transport priority mail and some first-class mail.