Exclusive: Government Warns On Royal Mail Sell-Offs

[TrueBlueTerrier]

http://blogs.news.sky.com/kleinman/Post ... d1ff766dbc" onclick="window.open(this.href);return false;

Royal Mail would cease to be a commercially viable business if it is forced to sell GLS, its profitable parcels arm, as part of a state aid settlement, the Government has warned.

Ministers have told the European Commission that GLS's cashflow is an essential contributor to Royal Mail's financial solvency and that without it, Royal Mail would struggle to survive.

The warning is contained in an application made to Brussels to approve billions of pouunds of state aid that the Government intends to give Royal Mail by assuming its historic pension liabilities and restructuring the company's balance sheet.

The application was filed with the Commission last week, and people familiar with its contents tell me that it makes a determined argument for Royal Mail to avoid selling any of its profitable operations.

Moya Greene, Royal Mail's chief executive, said last week that the company would need to be significantly smaller in future if it was to survive, although she declined to comment on whether there would be as many as 40,000 further job cuts.

Unveiling an annual operating profit of £39m after taking into account the £400m cost of Royal Mail's modernisation programme, Greene said:

""Royal Mail has been in significant financial difficulty for a number of years, reporting negative cash flow four years in a row. Our challenge is to put the Group and the Universal Service on a sound, secure and sustainable footing.

"We are honoured to collect and deliver the mail on behalf of households and businesses across the UK. But, our industry, along with our European peers, is in decline. At the same time the number of addresses that we must deliver to everyday increased by 300,000. Letters now account for a very modest share of daily social messaging. Inland addressed volumes peaked in 2005-6 at about 80 million items of mail a day. This year, we delivered 62 million items of mail a day, a decline of over 20%. We expect further declines of around 5% a year.

"We are losing money in our UK Letters & Parcels and International business - £120 million last year or over £2 million a week. Our margin, fell from 1.9% in this current year to 0.4%. It is slim compared to other postal operators and not enough to re-invest in our business."

In addition to the assumption of Royal Mail's historic pension deficit, the Government has asked Brussels to allow it to write off or repay a £1bn loan made to the company several years ago.

Private sector rivals have opposed the Government's assistance to Royal Mail and will lobby hard against the company's efforts to free itself from the regulatory shackles which dictate how much it can charge customers for business accounting for the majority of its revenues.

Royal Mail and the Department for Business, Information and Skills declined to comment on the content of the state aid application.

[thegreatestfreddy]

whats the implications of this 'TBT' ...?

[TrueBlueTerrier]

whats the implications of this 'TBT' ...?

A few Possible outcomes - we don't get the state aid approval and therefore the Government can't take the Pensions on - if that happens they either sell RM very cheap and hive off GLS quite expensively - or they keep both together hoping that GLS will push the price up. In this scenario the Pension Fund will be made to fail and we as posties will probably loose all benefits, especially those drawing on it already. However the Goverment would then step in with the various Pension Protection legislation that has been brought in over the years - we wouldn't get our full entitlement bu t we would get some - This is in my opinion the least likely scenario though as it would cost too much politically bith for the EU and the ConDems.

Another possibility is that we get the state aid approval and everything goes through OK. If this happens I see GLS being hived off within 5 years unless its written into the state aid approval. Even then as soon as they can they will sell GLS as it's quite a big player in Europe and TBH its the main selling point for anyone wanting to buy RM as a going concern.

The most likely possibility, in my opinion, is that we will have to sell GLS and the state aid approval will have a stipulation that RM cannot have the whole deficit (pensions and loans) taken on by the Government in one go, but they may allow a staged transfer of the debts, with RM paying a certain amount into the pot over a number of years. This is probably the worst case for RM as it will allow competitors to asset strip the firm, we will also have the burden of paying filling the pension black hole and fulfilling the USO, which WILL have to be weakened because RM in its slimmed down state will not be able to keep the USO at current levels.

So in essence the state aid approval and whether or not we get it, is probably more important in survival terms than the threat of privatisation was. Privatisation was the anvil to let the free marketeers at RM, whilst the aid is the hammer and it will decide the price, long-term future and ultimately the true cost to us the Posties and the nation as a whole.

[R@YAL F@IL]

GLS does the L stand for letters?

[TrueBlueTerrier]

http://www.gls-group.eu/276-I-PORTAL-WE ... ompany.htm" onclick="window.open(this.href);return false;

General Logistics Systems B.V., Amsterdam (GLS), is a Pan-European company providing reliable, high-quality parcel and express services as well as value-added logistics solutions. Through wholly owned and partner companies, the Group provides a network coverage of 42 European states and is globally connected via contractual agreements.

Our system consists of 38 central transhipment points, 642 depots and 13,100 people. Some 17,100 vehicles are on route moving 363 million parcels annually for 220,000 customers throughout Europe.

[R@YAL F@IL]

Thanks TrueBlueTerrier, you learn something every day or so they say.

[fishtank]

Thanks TrueBlueTerrier, you learn something every day or so they say.

The problem is you usually forget something old as well.

[R@YAL F@IL]

Thanks TrueBlueTerrier, you learn something every day or so they say.

The problem is you usually forget something old as well.

Something OLD something NEW something BORROWED something BLUE, ............ not the BLUEy you are thinking of though