• by Thom Forbes  @tforbes, May 7, 2020

President Donald Trump yesterday appointed a major Republican donor, North Carolina businessman Louis DeJoy, to be postmaster general on the same day that a group of online retailers led by Amazon and CVS launched an advertising campaign opposing the administration’s efforts to substantially raise the Postal Service’s package delivery fees.

“The coalition intends to spend more than $2 million on the campaign in an attempt to whip up Republican opposition to Mr. Trump’s idea, pressing lawmakers instead to support a multibillion-dollar rescue package proposed by Democrats that would help the Postal Service survive the sharp drop in revenue and mail volume caused by the pandemic,” Nicholas Fandos writes for The New York Times.

“The ads began running nationally Wednesday night on Fox News’s ‘Hannity’ -- one of Mr. Trump’s favorite programs -- and will be featured on Rush Limbaugh’s radio show on Thursday. They do not mention the president, but label his proposal to jack up delivery prices by 400% ‘a massive package tax’ on small businesses and Americans who rely on the mail for prescription drugs and other goods,” Fandos adds.

Meanwhile, the Postal Service’s board of governors confirmed that DeJoy, “who is currently in charge of fundraising for the Republican National Convention in Charlotte, will serve as the new postmaster general,” Josh Dawsey, Lisa Rein and Jacob Bogage write  for The Washington Post.

“The action will install a stalwart Trump ally to lead the Postal Service, which he has railed against for years, and probably move him closer than ever before to forcing the service to renegotiate its terms with companies and its own union workforce. Trump’s Treasury Department and the Postal Service are in the midst of a negotiation over a $10 billion line of credit approved as part of coronavirus legislation in March,” they add.

“DeJoy was a potential pick to become the Republican National Committee finance chairman in 2018 after serving as a deputy finance chairman, and he is the former CEO of New Breed Logistics. The President attended a fundraiser DeJoy hosted at his North Carolina home in October 2017 to benefit Trump and the RNC,” writes Caroline Kelly for CNN Politics.

“‘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 Wednesday, which noted that New Breed Logistics was a contractor to USPS for over 25 years,” Kelly adds.

But his appointment is raising issues beyond the possible dismantlement of the Postal Service.

“For vote by mail, this seems like putting a fox in charge of the hen house. Should Congress specify ways the Post Office has to cooperate with states' vote by mail efforts?” Bill Kristol, the neoconservative commentator tweeted.

“Trump has long railed against the Postal Service, particularly claiming the agency has been swindled by e-commerce giants that use the post office to send out millions of packages, such as Amazon. Late last month, Trump blasted the Postal Service as ‘a joke’ and vowed to block financial aid for the struggling agency unless it raised prices for packages ‘four times or five times,’” write  Peter Alexander, Dartunorro Clark and Haley Talbot for NBC News.

Even if it’s true that the Postal Service loses money on Amazon deliveries  -- a debated point -- without Amazon, things would be worse.

“USPS is a business that’s dominated by a fixed cost: a mandated delivery schedule in which people in trucks are delivering at homes and businesses,” points out  Rachel Premack for Business Insider. “Nicholas Farhi, a partner at OC&C Strategy Consultants, said that for a fixed-cost business like USPS, its largest customer is usually low margin or even outright unprofitable.”

“It’s extremely common for largely fixed cost businesses to appear to ‘make a loss’ on their largest customer, because the alternative, of losing that customer, would have a worse profit outcome than serving them at a lower price,” Farhi tells Premack in an email.

“In other words, losing Amazon as a customer would decimate the U.S. Postal Service's revenues but wouldn't save the company enough money to make up for it,” Premack sums up.

But Gary MacDougal, who has been a partner of McKinsey & Co., a CEO of Mark Controls Corp., a director of UPS and a temporary Christmas mailman when he was in college, argues  that “nostalgia shouldn’t keep alive an agency that is obsolete,” in a Wall Street Journal commentary. He says it should be phased out, not bailed out.

“The combination of UPS, FedEx, DHL, Amazon and countless local delivery companies would pick up the slack left by the wind-down of the post office. Smaller delivery companies may find an opportunity to expand to handle last-mile delivery in remote areas. If that isn’t enough, Amazon and others could charge more for deliveries to extremely remote locations,” MacDougal maintains.

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