It seems counterintuitive that a post office competitor could take a hit as the USPS struggles. But FedEx transports Express (overnight), Priority (two to three days) and First-Class Mail for the United States, and it earns a pretty penny for its services. In fact, in fiscal 2010 FedEx tallied a cool $1.37 billion in fiscal 2010. Yes, that’s “billion” — with a B.
FedEx’s postal revenues at one time topped $1.6 billion but have been on the decline recently as the U.S. has seen its mail volume decline. If the USPS eliminates delivery on Saturdays or cuts back in other ways, FedEx could see an even deeper decline in its revenue.
Ever wonder where you can buy yourself one of those distinctive USPS trucks? No, they are not Jeeps — but a transport truck known as the Grumman Long Life Vehicle (or LLV). These machines are made by industrial giant Northrop Grumman (NYSE:NOC).
Northrop Grumman is the No. 2 contractor behind FedEx on the list of USPS suppliers for fiscal 2010, with almost $500 million in revenue from Uncle Sam’s letter operations. While there haven’t been any new purchases of LLVs, the upkeep is pretty pricey since many of these mail trucks are approaching the end of their service life.
It would cost about $4.2 billion to replace the entire fleet — but you can bet that a simpler solution is to slash the number of Grummans as the USPS slashes the number of post offices and mail carriers in its ranks.
Northrop Grumman does almost $35 billion in annual revenue, so it’s not like the company lives and dies on the USPS contract. But considering the big defense spending cuts that will hit the rest of NOC operations, the loss of postal business couldn’t come at a worse time.
Every Consumer Business Nationwide
Did you know the USPS is the second-largest civilian employer in the U.S. after Wal-Mart (NYSE:WMT)? It’s true. There are some 570,000 full-timers on the payroll.
Let’s lay aside for a moment the value of those jobs, the efficiency of the Postal Service and the rate of pay those workers receive. Because any way you slice it, a significant reduction in that work force will have a significant impact on the American economy.
The U.S. Postmaster General has proposed reducing the payroll by 20% over five years — admittedly, mostly through attrition since union contracts prohibit layoffs — and that would result in about 114,000 jobs lost.
Consumer stocks already are hurting these days thanks to a downtrodden economy and weak spending nationwide. It would be silly to propose the USPS keep workers on its payroll just to prop up retailers — but it would be equally silly to act as if these massive reductions in the work force won’t have an impact.