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The future of USPS, delivered by UPS

A United Parcel Service (UPS) driver unloads packages from one truck to another Oct. 29, 2010 in Chicago, Ill.

Jeremy Hobson: Well today is Veterans Day which means, among other things, the Post Office is closed. It's competitors -- FedEx and UPS -- are open.

You can't really blame the Postal Service. It's expected to announce next week that it lost $10 billion this year. Congress is trying to figure out what to do.

We thought we'd ask Scott Davis for his thoughts. He's the CEO of UPS and he joins us now from Atlanta. Good morning.

Scott Davis: Good morning, Jeremy.

Hobson: I want to first ask you about the U.S. Postal Service -- the financially troubled U.S. Postal Service. Should it be saved?

Davis: Well I think certainly we have a need for the U.S. Postal Service in this country; they have plenty of challenges today as we know. But our relationship with the postal service is unusual: we're both competitors, as you know, but we're also a customer and a vendor.

In some areas where the population is not too dense, we will use them for that last mile of delivery. At the same time, we do fly some of their packages around the country. We're customers of each other, as well as being competitors.

Hobson: What do you think can be done with them? Is there a solution to this other than just getting rid of service all over the place, raising prices?

Davis: Well the challenges, frankly, that they have is the universal service, and the cost to deliver letters in places like South Dakota and Alaska are far more than a 44 cent stamp. Some of those letters may cost you $50 to deliver in Alaska, and they get paid 44 cents.

Hobson: How's business for you right now at UPS?

Davis: It's solid right now. I think the economy, while not growing fast in the United States, is growing. It has stabilized some.

If you look at the last four to six weeks, Jeremy, we've seen improving economic signs, both in manufacturing and in retail sales. As we head to our peak season, you know, there's cautious optimism among our customers at this point in time.

Hobson: Cautious optimism. I mean, we do look at companies like UPS and FedEx as bellwethers of the economy. But frankly, even as you guys have seen an uptick in shipping in the last couple of years, jobs really haven't been growing very rapidly in the U.S.

Davis: That's been a problem. We're not growing the economy fast enough to reduce unemployment. I've been a pretty outspoken advocate on the need to grow exports out of this country.

Today, only 1 percent of small- and medium-sized enterprises export goods, and the fact is, 95 percent of consumers are outside the U.S. So we have to do a better job of growing exports if we're going to reduce unemployment.

Hobson: What are people going to be shipping in five or 10 years? Are letters even going to be shipped anymore, or is that all going to be electronic and it's just going to be stuff?

Davis: There'll still be some letters out there. I think if you asked this question, Jeremy, 10 years ago, we probably would have said, yeah there's going to be a lot less in 2011. The same thing goes with five and 10 years ahead from now -- you're going to see much less in the way of letters and documents being shipped; it'll be done more electronically. The beauty of our business, though, is that we ship off a lot of packages. They're not digital.

Hobson: Not yet anyway.

Davis: Not yet anyway. So unless they come up with some new technology, we'll be shipping packages for the foreseeable future.

Hobson: Scott Davis is the CEO of UPS. Thank you so much for talking with us.

Davis: Jeremy, it's been great. Thank you.

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