An ambitious plan to reform the U.S. Postal Service and make it operate more like a commercial business is meeting strong skepticism from several corners of the private sector.

USPS unveiled its transformation plan last week, with proposals to cut $5 billion in costs by 2006 and create a "hybrid" business structure, combining both public and private sector operating strategies. Called a Commercial Government Enterprise (CGE), the USPS would remain a government-owned entity, but would enjoy some of the operational and financial flexibility found in the private sector, USPS said.

As a CGE, USPS would set rates more predictably, be able to retain earnings, work under private sector labor laws and, depending on future legislation, could even pay taxes or dividends to the government, it said. The structure would be similar in form to Fannie Mae, a congressionally charted but privately owned mortgage company.

Not everyone is thrilled with the idea, including freight transportation providers and key postal customers.

In comments to The Washington Post, a spokesman for Atlanta-based UPS said USPS should focus instead on first providing first class mail service, then getting its finances in order. Currently, USPS has $11.3 billion in debt and faces pension liabilities of $32 billion, the newspaper reported.

The Newspaper Association of America (NAA) also feels the private-sector focus does not help USPS face its current problems.

"To date, postal-reform efforts on Capitol Hill have failed to address major structural issues, including the mission and role of the Postal Service, its competition with the private sector, and structural changes to control costs, including labor, that continue to outstrip revenues," said NAA president & CEO John F. Sturm.

"Failure to directly address these major issues, is simply tinkering around with the system, and will require mailers of all sizes to continue to bail out the Postal Service with far too frequent raises in postage rates," he said.

Postmaster General John E. Potter disputed those issues after unveiling the 400-page reform initiative last week at the National Press Club.

USPS has already cut 30,000 jobs and $2.5 billion in costs over the past two years. The further $5 billion in cuts proposed for the next five years must come from improvements to the labor dispute resolution process, modernizing the rate process under the current regulatory framework and leveraging buying opportunities through aggressive purchasing, according to Potter.

In addition, the 225 year-old USPS needs to focus on developing new "intelligent" mail products to attract new business and better serve existing customers, he explained.

"Mail volume is going down, while at the same time 1.7 million new addresses are added every year," said Potter. "Our revenue cannot cover the increase in costs and it shows in our bottom line. We lost $1.68 billion in fiscal year 2001 and could lose as much again this fiscal year. But we have solutions to these challenges in this Transformation Plan and I look forward to discussing its details with Congress and the mailing industry."

He added that USPS receives no taxpayer dollars for routine operations, but derives its operating revenues solely from the sale of postage, products and services. It delivers more than 46% of the world's mail volume, some 207 billion letters, advertisements, periodicals and packages a year, and serves seven million customers each day at its 40,000 retail locations nationwide.