NZ Post faces dire financial straits
Thu, 26 Apr 2012 10:26a.m.
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New Zealand Post could slash its urban mail deliveries from six days a week to three, and wants a capital injection for its subsidiary KiwiBank from the Government.
Its chairperson, former Finance Minister Michael Cullen, says letter deliveries have been in a steady, ongoing decline and wants to reduce costs before an imminent Government bailout becomes a reality.
“For standard letters going into urban New Zealand, it would be very helpful if we looked at delivery perhaps three days per week because that enables us to make significant savings,” says Dr Cullen.
“Otherwise, in the next couple of years or so, the core postal system will move into a loss and I don’t think we can justify seeking a subsidy from the Government on the grounds this is a pure social service.”
Mail volumes were falling by 5 percent year-on-year, while the decline in the six months to the end of December 2011 was 7 percent, "which may well be the new norm", Dr Cullen says.
They have tumbled from 46 million in 1998 to eight million in 2012, and are forecast to drop to five million in 2018.
State-owned New Zealand Post has a Deed of Understanding with the Government, signed in 1998, which says it must deliver mail to New Zealand households six days per week, through the entire country at a standard cost.
Dr Cullen says this agreement, if not changed, will cripple the company and he is seeking an amendment to avoid the company going belly-up.
He has written a letter to State Owned Enterprises Minister Tony Ryall outlining the “fundamental changes” that are needed in the company.
“The business has reached the point where it can no longer just cut costs and rely on new product offerings to match falling volumes,” the letter stated.
“It is now clear to the board that the majority of short-term fixes have been exhausted.
He says the current networks of post shops around the country also needs to be modernised because the current outlook is very old fashioned.
KiwiBank, a wholly-owned subsidiary of New Zealand Post, also needs a capital injection from the Government, Dr Cullen says, in order to increase lending capabilities and upgrade systems it has outgrown.
“We would like to get into more areas like lending in the small business area, expand KiwiBank’s role as the only major New Zealand-owned bank,” Dr Cullen says.
“We understand that is a big ask and the ministers will want to be thinking carefully about that,” he says.
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27/04/2012 5:42:56 p.m.
woman in red wrote:
maybe they need to get rid of all the middle man and pen pushers, the ones that earn more than $25 a hour and manage to pretend their at work when their at home, or better still maybe upper management actually need to check up on their lower management, the posties are the genuine hard workers rain or shine.
26/04/2012 4:01:13 p.m.
Realistic Kiwi wrote:
This is inevitable...and perhaps, the day will come when you don't need postal or letter boxes anymore.
26/04/2012 1:05:00 p.m.
Once a company loses its market share profit shrinks. Trying to cut costs reduces service and that can lead to more loss. The main reason for the loss is the internet. An email is instant. Trade me would have helped postal markets with many goods shipped this way but overall the figues look grim. An old system that needs to move with the times and get onboard with technology. Nowadays the main thing received by post is bills and as companies move to online payment this will reduce more and more too.
Surley Cullen can buy a law change like sky city and increase rural costs and reduce the frequency. That would be a start.
26/04/2012 11:04:21 a.m.
Big D wrote:
I have gone further and further away from using the postal service where I can. Reason. Up to three days and at times more within a city. I remember doing a newsletter mail out a few years back on a Friday afternoon. Someone in the North Island had theirs the following lunch time, but another member in our South island City did not receive theirs until the following Wednesday.
So they wonder why the volume drops off. Another problem is that some of their staff cannot read addresses. We regularly get mail for the wrong street. My wife had the same at her work, sent to the wrong street, (both started with the same letter that was similar), even different districts. That was all. Taking around three days each time. I was speaking to a person who worked for the sorting office, and said he/she was leaving, sick of working with others who could not read and did not care, just threw mail into the nearest sorting basket.
26/04/2012 10:44:19 a.m.
Every business must adapt to change. NZ Post is no exception. Three day per week mail delivery to households would be fine. If Kiwibank is to grow it needs capital. Best option is a stock exchange listing similar to proposals for other SOE's
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