An Post's loss-making parcel division SDS has been suffering from poor sales activity, high absenteeism, poor credit control and a failure to implement change, according to a confidential internal report.

This week the company announced it was closing SDS and seeking 270 voluntary redundancies. Chief executive Mr Donal Curtin said SDS had become a serious drain on the company, losing €20 million in the last two years alone.

The report by consultants Paul Sweeney and Associates was commissioned by a joint management-union group and circulated internally last February. It warned that closing the division could have a negative impact on the industrial relations climate at An Post generally.

The consultants were asked to find out why losses were continuing at SDS despite a management-union agreement in May 2003 designed to restructure the business.

The report said a failure to maintain sales levels was one of the central reasons for this. It described the sales team as "poor to non-existent".

"A sales manager has finally been appointed and the company have indicated that a sales team is being put in place. While this is welcome it should have been done seven months ago," the report stated. It added that while sales activty was important, "unit costs must be attractive to retain and win customers".

The report also stated that management had failed to deal with the issue of surplus staff and had not implemented a change programme.

The report also commented on the level of absenteeism at SDS: "There is a high level of absenteeism of up 11 or 12 per cent which is unsustainable and in nobody's long term interest."

It said some of this related to delays in implementing the union-management agreement.

The report also highlighted the urgent need for SDS to find an international partner, preferably DHL. "The need for an international partner, specificially DHL, was sold to the union side as being essential to operate a seamless international parcel service. An agreement was to be completed in July 2003. Nothing happened then or since.

"Management appear to be against such a partnership today. The lack of urgency on what was supposed to be a vital link-up has undermined the strategy on the international side of the business," concluded the consultants.

They also claimed that poor credit control and a poor management information system existed at SDS and this meant a "lack of focus on good business and reduced cash flow".

In their conclusion, the consultants predict any attempt to close the business will be regarded as "a betrayal of the partnership process by group management".

Last night in a statement the assistant general secretary of ICTU, Mr Peter Bunting, claimed 700 jobs could go as a result of the SDS closure. He called on the Minister for Communications, Mr Dermot Ahern, to intervene to ensure a "proper process" was put in place to deal with the problems at SDS.