The nation's largest mail-carriers union wants the U.S. Postal Service to raise stamp prices and expand mail delivery.

In a report to be released Tuesday, it sharply criticizes the agency's own rescue plan and argues the Postal Service will become profitable only if it restructures itself like a business.

The National Association of Letter Carriers also indicated it would be willing to ask its nearly 300,000 members for more "tough sacrifices" to get the Postal Service out of the red. It didn't specify what concessions it would seek from members.

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The Postal Service's proposal to close thousands of post offices and cut back on the number of days that mail is delivered "won't work" and would accelerate the agency's decline, according to the six-page report by Ron Bloom, President Barack Obama's former auto czar, and investment bank Lazard Ltd. (LAZ), who were hired by the union in October.

Instead, the report says, the agency should raise its stamp prices, which are among the lowest in the world, and find new ways to profit more from its built-in advantage as the only entity to reach every American home every day. It should also replace its multilayered governance system with a corporate- style board of directors whose members have entrepreneurial experience.

The proposals are the opening salvo in what is expected to be a long series of negotiations as pressure mounts on Congress to approve legislation to restructure the Postal Service, which has said it is in danger of becoming insolvent without changes to its business model.

The union's plan is one of several competing proposals—including the Postal Service's and bills in Congress—that are promoting rescue ideas, and it illustrates the deepening divide over how to remake the 236-year-old institution for modern times.

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Labor groups, for instance, generally oppose cuts to service. The mailing industry opposes higher postage fees. Many legislators say the Postal Service needs to close facilities—but not in their district. And a Republican-led bill set to be heard by the full House looks askance at any proposal that would allow the Postal Service to compete with private industry. That bill's backers say the agency should act like a business—to a point.

"Reducing excess capacity and adapting delivery to America's changing use of mail is exactly what any business would do as technology changes the market," said Ali Ahmad, a spokesman for the House Oversight and Government Reform Committee.

The Postal Service is facing historic losses—more than $5 billion in its most recent fiscal year—that it attributes to a shift in communication habits in the digital age and to an unusual requirement imposed by Congress in 2006 that it fund retiree benefits decades ahead.

Along with asking Congress to ease the pre-funding requirement—the union backs that, too—the Postal Service wants to cut more than 150,000 jobs, slow first-class mail delivery, end six-day delivery, and close 223 mail-sorting facilities and as many as one in every three post offices as part of a plan to become profitable in five years. It is also pursuing new revenue sources, such as promotions to get businesses to send more direct mail.

The Postal Service said in a statement Monday it hadn't yet seen the union's report.

The union concedes that some "shrinkage" in the system is necessary, Mr. Bloom said, but he added that the Postal Service's cuts will result in more revenue losses than savings.

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He compared the Postal Service's strategy to General Motors Co. before its restructuring. "Their strategy was to lose slowly, to shrink to survive," he said.

Currently, he added, the Postal Service does some last-mile delivery for United Parcel Service Inc. (UPS) and FedEx Corp. (FDX), but "we think they could do a lot more." He said there would be a "huge growth opportunity" if the Postal Service began delivering pharmaceuticals or items for small businesses that can't afford their own delivery network.

The Postal Service should be able to raise stamp prices, which are among the lowest among developed countries, the union's report said. Currently, the Postal Service can't increase postal rates faster than the rate of inflation under a 2006 law that provided commercial mailers a rate cap they had long sought.

"They are asked to carry out a social mission, a universal service obligation…but on the other hand we want them to run like a business, break even and not consume taxpayer dollars," Mr. Bloom said. "Let's at least give them pricing flexibility so [they] can act like a business."

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