The same day the strike ended, the Nixon administration and the postal unions began their negotiations. The White House was willing to give the workers a salary increase in return for the unions’ endorsement of postal reform. As far as Rademacher was concerned, it was largely a matter of what the number would be. But other postal labor leaders were still furious at him for breaking with them in December and joining forces with the White House. They wanted to discuss a raise first and postal reform later, and they chose the AFL-CIO’s president George Meany, the grand old man of the labor movement, to negotiate for them. Rademacher didn’t mind: the unions all belonged to the AFL-CIO. But he was soon at odds with Meany’s people. James Gildea, Meany’s executive assistant, told Rademacher not to appear on television while the two sides were talking. Rademacher refused. “This is a letter carriers’ strike,” he said. “I’m not getting off TV. I’m telling the public our story.” And he did, too. The other union presidents tripped over the cables that television crews had unspooled on the floors of the AFL-CIO’s headquarters so they could do live interviews with Rademacher during the breaks. “It’s like a three-ring circus,” one complained.
The two sides agreed to an immediate six percent raise. Then it was time to discuss what it might cost for the postal unions to support a reform bill. The White House offered an additional six percent raise, but Rademacher says he insisted on eight percent. “We got eight percent in addition to six percent, which is 14 percent,” he says. On April 6, Meany and the postal union leaders sat at a large round table at the White House with Nixon and signed a memorandum of understanding finalizing the deal. Nixon said he would ask Congress to raise stamp prices from six cents to 10 cents to pay for the raises—the second of which would go into effect only after Congress passed the reform legislation.
Now that the strike was over, however, neither the House nor the Senate felt the need to move swiftly, and union militants started talking about another walkout. In a speech on April 27 at the National Press Club, Blount predicted there would be an even bigger strike if Congress didn’t act. “We are going to have chaos and it’s going to be widespread in the postal system if we don’t change the system,” he warned. “We are not going to be able to get through the next upheaval as quickly as we got through the last. There’s nothing I can do. There’s nothing the president can do, there’s nothing anybody else can do more than we have—we can advise, suggest, recommend and we can please, and we’ve done all that but only Congress can decide.”
Meanwhile, Rademacher tried to persuade his members to go along with the deal, telling them how much better everything would be under the new system. “One of the first things that this administration, that is only two years old, wants to do is get out of the stranglehold that Congress has on us,” he said at an NALC banquet in Michigan. “We’ve got to get away from Congress and sit down at the bargaining table; not on a one, two, or three percent increase basis, but on meaningful increases. I favor reform because it takes us out of Congress and puts us at the bargaining table.”
On August 12, 1970, Nixon signed the Postal Reorganization Act at the department’s headquarters before an audience of 150 people, including six former postmaster generals, among them James Farley, who posed for a picture with the Republican president. Nixon reminded his listeners how skeptical he had been less than two years earlier when he first talked to Blount about reconfiguring the Post Office. Nixon said he knew of several of Blount’s predecessors—among them Lincoln’s Montgomery Blair—who had fought to stay in the president’s cabinet. “I think what distinguishes the present Postmaster General is that he is probably the first who holds this office who instead of fighting to stay in the President’s Cabinet has fought to get out,” Nixon said.
Blount stood behind Nixon grinning as the president took out his pen and signed the bill. He would claim responsibility for ridding the Post Office of the patronage hiring that had plagued the department since Andrew Jackson’s day. Blount was disappointed that Congress insisted on creating a Postal Rate Commission to approve stamp price increases, but he went along with it because he wanted to get the bill through.
Rademacher sat a few rows back in the audience. He had been politically damaged by the strike, but he had done more for his members than any of his predecessors. He had gotten them a 14 percent raise. They would be able to reach the top of their pay grade after eight years instead of waiting for 21 years. What’s more, they would finally be able to directly negotiate with management, the holy grail of the labor movement. “We finally got collective bargaining instead of collective begging,” Rademacher says.
Everybody at the event deserved to feel good about what they had done so far. As Nixon said, it was a day to celebrate bipartisanship and the ability of people with very different philosophies to work together. But there were flaws in the legislation that would soon become obvious. It was one thing to pass a bill depoliticizing the Post Office, but it was still a federal agency subject to the whims of Congress. The difficult work of transforming the agency was just beginning.
9
Interlopers II
In 1972, a curious article appeared in the New York Times under the headline “Carload of Mail, Lost in ’70, Found.” The story reported that a boxcar full of packages and junk mail bound for Birmingham, Alabama, on the Penn Central Railroad had gone missing somewhere between Philadelphia and Washington two years earlier. Postal inspectors had been searching for the boxcar since then and were mystified when they finally located it on a rarely used track in Perryville, Maryland. “Our inspectors made a two-year car by car search all over the Washington area,” a USPS spokesman said.
However, the Penn Central Railroad said its employees, not the postal inspectors, had found the mysterious boxcar and that the agency had never notified it about the missing mail. Either way, this was a lot of late mail, and it seemed to indicate a larger problem at the newly reconfigured postal service.
As soon as the reorganization act passed in 1970, Winton Blount set out to transform the Post Office, which would be renamed the U.S. Postal Service. He recruited a board of governors from the private sector led by Frederick Kappel, the architect of the restructuring plan, and the heads of major corporations like Texas Instruments, Marine Midland Bank, and Humble Oil. Blount purged the upper ranks of the postal service of 2,000 long-serving bureaucrats, replacing them with bright young managers from the outside, some of whom he sent to Harvard Business School for training.
They would need it. The newly independent postal service faced a Herculean challenge. In 1971, its managers presided over an organization with 728,911 employees and a $9 billion annual budget. Even with a telephone in every household, the amount of mail was growing at a daunting pace. That year, the USPS delivered 87 billion pieces, 22 billion more than it had a decade earlier, but the system desperately needed to be modernized. So much was still broken from the previous decade.
More than anything else, the USPS needed to get first-class mail moving faster. In 1971 it delivered 50 billion letters, which accounted for 57 percent of its total volume. The agency continued to experiment with high-speed optical character readers, but these machines couldn’t read handwritten addresses yet. So Blount accelerated the use of mechanical letter-sorting machines, which were operated by a dozen clerks who sat at their stations punching in the first three numbers of zip codes as letters zipped past them at the rate of one per second. These machines weren’t as fast as the optical character readers, but they enabled a dozen clerks to process 36,000 letters in an hour, which was a big improvement over hand sorting.
The USPS also embarked on a $1 billion plan to construct 21 new bulk mail centers to sort packages and large qualities of magazines and junk mail. It was the biggest investment in the service’s history, but Blount hoped new facilities equipped with conveyor belts and chutes would enable the postal service to win back business from United Parcel Service, a private company, which had be
en delivering packages for department stories like Macy’s since the 1930s and was expanding around the country.
In October 1971, Blount resigned to run for the U.S. Senate in Alabama as the man who had fixed the Post Office, which had always seemed to be his plan. He lost. At least one southern editorial cartoonist suggested that Blount hadn’t saved the postal service, but had left it a smoldering ruin. As the case of the missing boxcar showed, service hadn’t improved. For decades, clerks had passed letters through the system with just a name and sometimes just a city. When people sent letters addressed to “John Wayne, Hollywood, California,” clerks directed them to the right post office, where they were promptly delivered. The system may have been slow, but much of the time it worked.
Now clerks learning the mechanical letter-sorting machines keyed in numbers incorrectly, sending letters to the wrong cities. “These days, it seems, just about everybody has some personal horror story to tell about the U.S. Postal Service,” Fortune wrote in 1973. “A check mailed by a woman in Charlestown, West Virginia, to Ravenswood, fifty-two miles away, took nine days to arrive—by which time she received a delinquent-payment notice. On Valentine’s Day a resident of Elizabeth, New Jersey, received a Christmas card postmarked December 10. . . . On occasion, letters embark on extraordinary detours. A real-estate agent in Coral Gables, Florida, mailed a contract to a lawyer five blocks away. It arrived five days later, having made a round-trip journey to Los Angeles. More entertaining was the experience of an Atlanta businessman who last April was invited to a ceremony at the local post office. The invitation reached him ten days after the event.”
The expensive bulk mail centers also turned out to be a disaster. Charles Wilson, a congressman from California, paid what he described as a “midnight visit” to the Detroit post office and found tens of thousands of mangled packages that had passed through the new system. In a hearing, Wilson complained that Americans were paying more money for lousier mail service, which was becoming a common lament. Other federal agencies like the Internal Revenue Service and the Government Printing Office started sending their fragile items through UPS rather than entrusting them to the USPS, further embarrassing the government mail service.
Then there was the spiraling cost of the USPS’s employees. In 1971, the agency’s managers negotiated its first contract with the seven unions. A year before, the postal service had given its workers a 14 percent raise, but now the union leaders demanded more money and members threatened to strike again, terrifying banks and magazine companies that depended on the mail to conduct business. These large customers pressured the USPS to keep the workers happy. Between 1971 and 1975, the postal service signed three collective bargaining agreements that raised an experienced postal worker’s annual salary from $9,700 to $15,000 or $66,000 in today’s dollars. Was the USPS giving away too much? After the signing of the third contract, the Wall Street Journal asked Francis Filbey, president of the American Postal Workers Union, which now represented 300,000 clerks, maintenance workers, special delivery messengers, and truck drivers. “I don’t consider it generous,” Filbey said. “It is the best the Postal Service could do under the present circumstance.”
The public might have disagreed. In 1975, the USPS lost $1 billion, twice as much as the year before. Meanwhile, the price of a first-class stamp reached 13 cents more than double what it had been four years earlier. Nobody expected the USPS to become financially self-sufficient right away; Congress had given it until 1985 to erase its annual deficit. But now lawmakers began to worry that the USPS might never pay its own way.
Predictably, there was a backlash. Members of congress who had voted for postal reform regretted it. Some introduced bills that would restore the old system. “No one expected the transition of the Post Office Department to the U.S. Postal Service to be easy, but on the other hand, neither did anyone expect it to be catastrophic,” said New York Democrat Thaddeus Dulski, chairman of the House Committee on Post Office and Civil Service. James Farley, the best-known postmaster general of the twentieth century and perennial defender of the patronage system, laid the blame for the agency’s troubles on the restructuring. “I thought it was a mistake when they made the change and put it into a separate agency way out of the cabinet,” Farley said. “I said so at the time and I think that’s responsible in a large measure for what’s happened to the department.”
The New York Times offered its own gloomy prognosis in an April 1977 editorial entitled, “Delivering the Bad News.” “It is clear now that turning the United States Post Office into an autonomous public corporation in 1971 has failed to realize the hopes of its proponents,” the Times wrote. “Mail service has not improved; many believe it has actually deteriorated.” The Washington Post was similarly skeptical: “Consider a corporation whose volume is stagnating; whose labor costs rose 63 per cent between 1971 and 1976, while productivity improved only 1.3 per cent; whose major new parcel post processing system may bring no return at all. . . . Any analyst would call that a corporation in big trouble.”
Around the country, private mail companies with names like PF Brennan Mail Delivery, Marathon Postal Service, Post Haste Delivery, Independent Carriers of America, and Union Postal Systems of America materialized to take advantage of the public’s discontent just as William Harnden had done more than a century earlier. The USPS shut down small private carriers, even going after Kenny Maguire, a 14-year-old boy in Charleston, South Carolina, for delivering letters in his neighborhood on his bicycle. It had a harder time with Larry Hillblom.
As a law student at the University of California at Berkeley in the mid-1960s, Larry Hillblom had long, curly brown hair and wore tight shirts and jeans, blending in with the radicals on the campus, but he wasn’t one of them. Hillblom mocked their sit-ins, saying they would never achieve anything unless they adopted Mao Zedong’s ruthless methods of consolidating power. It wasn’t what the other students wanted to hear, but Hillblom didn’t care.
Having grown up poor in Kingsburg, California, a small town near Fresno, Hillblom was more interested in money. He paid his own way through law school and in his second year at Berkeley, he found a job working as a messenger for a firm that transported documents for law firms and insurance companies between San Francisco and Los Angeles. Every evening after classes, Hillblom would take a full pouch on the last flight from Oakland to Los Angeles. The next morning, Hillblom would make the same trip in reverse and be back in time for classes at Berkeley. He looked as if he had slept at the airport, and he probably had. Hillblom often did his homework in flight.
Hillblom could see there was a bigger opportunity here. American companies were extending their reach around the world. They couldn’t wait for the USPS to transport their contracts, blueprints, and legal documents to foreign countries. Hillblom could meet their needs by purchasing a plane ticket and hand-delivering their paperwork, bypassing both the postal service and foreign posts.
In 1969, he founded an overnight courier company called DHL with Adrian Dalsey and Robert Lynn. All they had between them was $500 in cash and a credit card. Lynn was a real estate investor who extricated himself from the fledgling company within a year because he didn’t think it had a future, leaving Dalsey and Hillblom to run DHL. The two remaining partners squabbled constantly; Hillblom would eventually force Dalsey out of DHL, but for the time being they complemented each other. Hillblom was a strategist who preferred to work behind the scenes. Dalsey was a middle-aged salesman who knew how to get his foot in the door and see the right people at companies like Bank of America, IBM, and Standard Oil, and at the Federal Reserve, all of which became clients. In DHL’s early years, the two founders and their friends and relatives often carried documents on planes, which made it a fun place to work. Soon, DHL had opened a headquarters in Honolulu and satellite offices in Guam, Tokyo, Manila, Sydney, Hong Kong, Japan, and Singapore. By the mid-seventies Hillblom was a millionaire.
Then he ran into trouble in
1975, Hong Kong postal inspectors forced their way into DHL’s office in the red-light district of that city, seizing its pouches and criminally indicting the company for violating its monopoly on letter delivery. So Hillblom flew to Hong Kong and hired Henry Litton, a prominent local attorney, to defend his company. Litton’s case was simple: he argued in court that most of what DHL carried for its clients—blueprints, computer tapes, IBM punch cards, and checks—didn’t fit the antiquated definition of a letter on which the colony’s postal officials relied. A judge exonerated DHL, but it wasn’t the end of the battle for DHL.
Hong Kong’s post office immediately sought legislation to expand its legal authority. Hillblom hired a publicist who orchestrated a campaign to get the post office to reconsider. The press agent invited Hong Kong’s postmaster to debate Henry Litton at a posh downtown hotel. When the postmaster declined the invitation, Litton debated an empty chair, much to the amusement of the executives from multinational corporations who used DHL and had come out to show their support. Up until now, the colonial legislature had backed the postmaster, but now the legislators decided not to intervene. It was safe once again for DHL to do business in Hong Kong.
The victory prepared Hillblom for a similar battle in the United States. Rather than raiding on DHL’s offices, USPS inspectors visited the mailrooms of its customers, seeking back payment for items sent outside its network. Postal service salesmen usually showed up the next day, telling these companies they could avoid prosecution by using the USPS’s Express Mail service. “They were thugs,” says James Campbell, a former DHL attorney. “They were selling protection. They were basically intimidating people.” Some DHL customers calculated how much it would cost to send a package through the U.S. mail system and put the appropriate number of stamps on their packages before sending them through DHL, much as Wells Fargo customers had done a century before in California.
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