USPS Taps Logistics Veteran Louis DeJoy As Next Postmaster General

Earlier this week the United States Postal Service (USPS) announced that it has named Louis DeJoy as its 75th Postmaster General and CEO.

Dejoy will be replacing Megan Brennan, whom has been serving in the position since 2015, and will take over on June 15. The incoming USPS chief will be the fifth Postmaster General to come over from the private sector, going back to when the USPS, in 1971, became an independent establishment within the Executive Branch.

DeJoy’s background has a heavy logistics and supply chain focus, having more than 35 years of experience. And during his tenure as chairman and CEO of New Breed Logistics, he spent years collaborating with the USPS. Boeing, Disney, Boeing, Verizon, Disney, and United Technologies, among others, providing supply chain logistics, program management, and transportation support, said the USPS.

“Having worked closely with the Postal Service for many years, I have a great appreciation for this institution and the dedicated workers who faithfully execute its mission,” DeJoy said in a statement. “I look forward to working with the supporters of the Postal Service in Congress and the Administration to ensure the Postal Service remains an integral part of the United States government. Postal workers are the heart and soul of this institution, and I will be honored to work alongside them and their unions. It will be an incredible honor to serve as Postmaster General, and I commit myself to upholding the Postal Service’s cherished role in our nation.”

The incoming top executive is joining the USPS at a time, when the organization has had major financial issues over the last several years. Some of the things causing this financial pain include: an ongoing decline in First Class Mail revenues and volume, due an ongoing migration from mail to electronic communication and transaction alternatives; a decline in Marketing Mail revenue; and its $33.9 billion retiree health benefit prefunding obligation, which it defaulted on from 2012-2016.

A bright spot, in recent years for the USPS, has been the strong performance of its Shipping & Packages Group, which, in recent quarters, has accounted for roughly 30% of its operating revenue and around 4% of total volume.

What’s more, DeJoy’s appointment comes at a time when there remains a fair amount of acrimony between the USPS and President Trump. That was evident, according to an April 11 Washington Post report, which noted “Trump threatened to veto the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, if the legislation contained any money directed to bail out the postal agency.”

The USPS did receive a $10 billion loan through the CARES Act, but Trump has said that it will not be approved unless the USPS increases its shipping and package rates at least three or four times current rates. Further complicating things, current USPS Postmaster General Brennan recently said that the USPS is facing a $13 billion loss in revenue, due to the COVID-19 pandemic and an ongoing decline in mail volume and told the House Oversight and Reform Committee that it faces the possibility of running out of money in the current fiscal year should it not get needed financial help.

Jerry Hempstead, president of parcel consultancy Hempstead Consulting, told LM that DeJoy is facing a tough situation in his new role.

“There are high expectations that bringing in an outsider will experience in logistics will be able to raise his hand and part the sea and lead the USPS to the new land of prosperity,” he said. “Unfortunately for him the Secretary of the Treasury, and the White House, even the new PMG does not have the mojo to fix the underlying fundamental issues. It takes an act of Congress.” 

Hempstead said that the reality is the way universal service is perceived today it assumes that every residence gets their mail delivered six days a week, noting that no residence needs mail—not parcel—delivery six days a week. Due to this, he explained that if, for example, mail delivery was only twice a week, it would reduce the demand put on the USPS to deliver six days a week, which could halve its workforce.

“The problem with taking the parcel rates up is that it will drive more business to Fedex and UPS,” he said. “The Amazon business is going away anyway, as they add more trucks and drivers. FedEx has already said they are going to stop using the USPS for SmartPost, and UPS already pulled everything over 10 pounds from the USPS for SurePost. If you look at the P&L, the coal pulling the engine is not parcel. It’s mail. And if you raise the parcel prices on say Amazon and FedEx and UPS, you may end up with fewer packages and less revenue than you have today.”

The other part of the P&L problem, Hempstead said, is revenue on mail. On the mail it’s a monopoly product and Congress limits how much prices can go up so the cost to deliver mail is not covered by the revenue coming in from mail, he added.

“Granted part of the cost problem on the P&L is, or was, the prefunding requirements for retirement and retiree health,” he said. “Either the USPS needs to cover it or you and I have to cover it. Right now I think the USPS has about $170 Billion in unfunded liabilities. Who do they owe that to? Well you and me. And the government isn’t going to let them ‘go out of business’ so we are holding an bag of IOUs right now. So unfortunately for the incoming PMG (as it was for the outgoing PMG) unless Congress changes the rules of engagement for Universal Service and pricing, we will just have more of the same and this new PMG will look like he doesn’t know what he’s doing. The lobby for the letter carriers is powerful, and the lobby for the mailers is just as powerful so I’m not hopefully optimistic that we are looking at a fix other than a bailout.”