Tuesday, August 11, 2009

The next big bailout? 

How to avoid it?

So you think your business has problems. Consider the plight of John E. Potter, the chief executive of the second-largest employer in America.

On the one hand, he has a guaranteed monopoly for much of his business. On the other hand, monopoly or not, the combination of the Internet and the recession is absolutely crushing his company, just as it is for so many other companies across the country. His last quarterís results, which were announced on Wednesday, revealed a loss of $2.4 billion. The business is on track to lose a staggering $7 billion in 2009, on around $68 billion in revenue. Thatís practically General Motors territory.

What can he do to fix the situation? Surprisingly little. His employees have clauses in their union contracts that forbid layoffs. Nor can he renegotiate their gold-plated benefits, the way, say, the auto companies did when their backs were against the wall. Political pressure makes it nearly impossible to shut down any of his companyís 34,000 facilities, no matter how outmoded or little used. He can borrow money, but under the law, he can add only $3 billion in debt a year ó an amount that isnít going to come close to covering his losses.

Oh, and get this. Every year between now and 2016, he has to put aside over $5 billion to finance health benefits for future employees. You read that right: future employees. There isnít another business in the country that finances benefits for employees it hasnít even hired yet ... ([The] main purpose, it would seem, is government accounting: those funds get counted against the federal deficit.)

Welcome to John Potterís world. Heís the nationís postmaster general ... [NY Times]