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September 12, 2011 6:45 AM, EDT

By Greg Johnson, Staff Reporter

This story appears in the Sept. 12 print edition of Transport Topics.

Some truckers are warily watching Washington as the White House crafts a plan to save the U.S. Postal Service, which, officials have said, is quickly running out of money to pay its bills.

Trucking is paying special attention because fleets earn billions of dollars in revenue from hauling postal freight each year.

“We are concerned, but we realize the post office is a much-needed service for the American public,” said Gerry Beam, president of Beam Bros. Trucking Inc. In 2010, the Mount Crawford, Va., motor carrier earned $46 million in revenue carrying postal shipments, Beam said. He added that USPS accounts for 90% of his fleet’s business.

According to news reports, to save the Postal Service, the Obama administration is likely to ask Congress for a 90-day extension of the Sept. 30 deadline USPS faces for making a $5.5 billion payment to fund future retiree health benefits.

That’s also when USPS expects to reach its $15 billion borrowing limit, Postmaster General Patrick Donahoe told the Senate Committee on 91��Ƶland Security and Governmental Affairs last week.

“We are hoping that Congress passes legislation that provides long-term solutions to our financial problems,” said USPS spokesman David Partenheimer. “If that doesn’t happen, we may not have enough money to operate by next August or September.”

A sharp cut in USPS operations would cost some truckers dearly.

In 2010, USPS spent $3.2 billion on ground transportation and $2 billion on airfreight, said David Hendel, a partner in the Washington law firm Husch Blackwell LLP, which tracks postal contractors.

In all, USPS has 8,000 transportation contractors and about 4,500 suppliers, Partenheimer said. USPS also owns 1,820 tractors, 4,001 trailers and 2,166 straight trucks, he said.

FedEx Corp., is the largest postal contractor, garnering $1.37 billion in 2010 revenue under a seven-year, $1 billion-a-year contract to carry mail, Hendel said. The contract expires in 2013.

“FedEx values its alliance relationship with USPS, both as a supplier and a customer,” Maury Donahue, FedEx’s manager for regulatory and public affairs communications, said in a statement. “FedEx Express provides outstanding transportation services to USPS, and FedEx SmartPost provides USPS with hundreds of millions of dollars in revenue each year.”

To save money, USPS plans to cut its processing centers to 200 from 508, the postmaster general told the Senate committee. It also hopes to pull more freight off aircraft and put it on highways, Hendel said, but closing the processing centers may hurt many truckers because some might be left without a processing center to haul to or from.

Foreman Bros. Inc., a Detroit-based contract hauler of postal mail and packages, relies on the USPS for about 85% of its annual business, about $12 million, said Tim Foreman, vice president of operations.

Foreman said 80 of his 100 employees handle postal freight and 50 of the company’s 65 tractors and 70 to 80 of its 90 trailers are dedicated to hauling post office shipments. With a threat of a USPS default, Foreman admitted that “a few guys are worried and have begun to ask what will happen to them.”

Others fret over a 2012 worst-case scenario of the Postal Service actually shutting down for lack of cash.

“Let’s just hope it doesn’t get that far,” said Paul Blair, operations manager at Trojan Horse Ltd., a 150-truck Jessup, Md., postal contractor whose 250 employees work only on postal shipments.

If a 2012 shutdown happened, most drivers who haul postal shipments probably would be laid off, said John Sheehy, president of operations for Sheehy Mail Contractors Inc. The Waterloo, Wis.-based subsidiary of Sheehy Enterprises Inc. has been hauling postal mail since 1952, Sheehy said, and now has 80 of its 100 tractor-trailers carrying USPS shipments.

Sheehy Mail does about $14 million a year with USPS, he said. A shutdown “would probably not take us out, but we would have to downsize quickly,” he predicted.

The company has 200 employees, with 150 of them working on postal freight. “They do other things, of course,” Sheehy said, “but I need that many to cover all my postal routes.”

USPS’ troubles pose a dilemma for UPS Inc., which took in 2010 postal revenue of $95 million, according to Hendel’s report.

“The post office is a competitor and a collaborator,” said UPS spokeswoman Susan Rosenberg. She noted that if the Postal Service cuts back, it would give UPS an opportunity. The Atlanta package carrier’s UPS Store division has 4,000 locations across the United States, and UPS offers a variety of shipping options for postal customers ranging from premium early delivery to no-frills shipments, she said.

There’s no denying USPS is in dire straits. Its deficit may top $10 billion this fiscal year, Donahoe has said. The postmaster general has pushed to do away with Saturday mail delivery, close up to 3,700 post offices and lay off 120,000, or one of five employees. Donahoe spent last week pleading with Congress for approval to cut postal workers because union contracts contain a no-layoff clause.