Time to stop Canada Post’s slow-motion death march
“We will stop Stephen Harper’s plan to end door-to-door mail delivery in Canada and undertake a new review of Canada Post, to make sure it provides high-quality service at reasonable prices to Canadians, no matter where they live.”
Of the hundreds of election promises made by Justin Trudeau, this one ranks among the most naive.
Ending home delivery for the one-third of Canadians who still receive it saves Canada Post more than $200 million a year.
It’s a key part of its $700-million Five Point Action Plan to make the corporation profitable.
The Liberals’ “fully costed” campaign platform doesn’t mention compensating Canada Post. It’s as if the corporation can somehow lose $200 million in annual savings and not slide back into operating losses — covered by taxpayer subsidies.
The “new review” of Canada Post — the third in the past 10 years — implies there is a silver bullet that will allow it to deliver fewer letters to a growing number of addresses at a reasonable price. It’s this universal service obligation that’s placing the greatest financial burden on the corporation.
The Harper government allowed Canada Post to struggle for years with a “Transformation Plan” that failed to deliver the promised financial and service results.
It hired Moya Greene, an executive with privatization experience, to head up Canada Post in 2005. She proposed a gradual privatization to raise capital and inject innovation.
The corporation was profitable, debt free, worth about $1.5 billion and had a fully funded pension plan.
Harper failed to act when the conditions were most favourable. Greene was later hired by Britain’s Conservative govern- ment to run the Royal Mail.
She oversaw the sale of the 500-year-old agency for $6 billion.
By 2013 Canada Post was bankrupt. Its corporate debt had ballooned to $1 billion. It was losing money and its pension plan was underfunded by a staggering $6.5 billion. (All these financial obligations are guaranteed by Canadian taxpayers.)
The Harper government said if Canada Post would implement a tough Five Point Action Plan it would receive four years of relief from making up its pension deficit. This delays but doesn’t reduce the obligation.
The Action Plan relies heavily on large rate increases and lower delivery costs (removing home delivery). This formula, with the pension obligations temporarily lifted, produced a short-term profit last year.
But by the middle of this year, the corporation was again facing losses. Growth in Canada Post’s parcel business is not enough to offset the impact of cheaper and faster digital alternatives for moving money and messages.
This means Canada Post may soon be looking to the government for operating subsidies to continue the universal letter mail service, something Trudeau neglected to mention in his postal promises. Meanwhile, the corporation’s pension plan deficit has grown to $6.8 billion.
A new review will likely conclude there is no sustainable business platform left for Canada Post that won’t require massive subsidies.
“Real Change” means ending this slow- motion train wreck.
First, Canada Post owns 90 per cent of the parcel company Purolator. It is run separately from Canada Post and has been profitable for years. It should sell for somewhere between $1.5 billion and $2 billion. The proceeds should go toward paying down the corporation’s mounting pension deficit.
Second, Canada Post only exists as a government-owned corporation to ensure “a letter mail service at uniform rates is available in every region of Canada.”
It was given a monopoly on letter mail to finance this obligation. But with declining volumes and growing points of call, even large rate increases can’t stem the tide of letter mail losses.
Third, faced with this same dilemma, countries like Germany, the Netherlands and New Zealand opened up their letter mail delivery to private competition. Lower-cost competitors can make money on all but remote rural routes. It’s cheaper to pay them a subsidy to provide this service than to support Canada Post’s high-cost monopoly.
Finally, freed from the universal mail obligation, Canada Post should be privatized and the proceeds go to paying off as much of its debt and pension shortfall as possible.
Some former public postal systems have gone on, under private management, to become profitable international competitors.
Instead of promising more of the same, Trudeau should end Canada Post’s death spiral with real changes that should have been implemented years ago.
Of the hundreds of election promises made by Justin Trudeau, a ‘new review’ of Canada Post ranks among the most naive