Government Operations Committee on May 12th, 2016

[The Chair, Conservative, Tom Lukiwski]

Thank you very much for both the questions and the answers.

Mr. Blaney, please, for seven minutes.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

I want to begin by welcoming you and the members of your team to the committee, Mr. Chopra.

As I told you before we started the formal meeting, we will surely have an opportunity to work closely over the next few months, especially this fall. We will be happy to see you again to contribute to Canada Post's effort to adapt. Your presentation was very enlightening on that issue.

First, I want to offer you the committee's cooperation. Our objective is clear. We want to ensure that we are able to help you fulfill Canada Post's mandate, while taking into account your changing context.

Second, it should be pointed out that Canada Post is an independent corporation. However, when it runs into financial difficulties, taxpayers foot the bill. So we want to encourage you to continue along the path to profitability.

We have also seen the annual report that provides an overview of the situation. You did a good job of illustrating the challenge stemming from the fact that Canada Post is processing less and less mail and letters, but more and more parcels. Could you tell me how you see the coming years in terms of profitability in light of market changes, pressures you face and opportunities available to you?

As you said, you are barely managing to keep afloat. In 2015, Canada Post made a profit of $169 million. Business was also profitable in 2014, but there were operating losses over the previous three years. Basically, how do you see this year and the upcoming years in terms of profitability?

[Deepak Chopra]

The single largest issue we're facing is the decline of letter mail. In its early days, between 1969 and 1975, letter mail grew by a billion mail pieces. Between 2006 and 2015, letter mail declined by 1.6 billion pieces. So our biggest challenge is to overcome the financial gaps that will be created by the very core business that has been the purpose of the corporation for at least the last 50 years.

We do not see the decline of letter mail; on the contrary, we see the decline of letter mail accelerating. When you open a bank account now, or open a cellphone account, your default option for getting your monthly bill is electronic. Increasingly the default option for virtually all communications is electronic. So we suspect that this acceleration will gradually increase. We're seeing this in media, we're seeing this in publishing, and we think this will continue to be a significant pressure on the corporation.

On your question about opportunities, we have looked at several areas of opportunity. The one we found where we had the core competencies was to deliver parcels, but parcels is still a quarter of our business. Even if we grow parcels extremely well...which is what we have done over the last two to three years in particular. In fact we are very proud of the work our employees are doing, day in and day out, winning in a highly competitive environment. Canada Post continues to deliver great service to retailers. But we think that opportunity will not be sufficient to overcome the size of the problem.

We also have a pension plan that has over $6 billion in solvency deficit.

Under the temporary relief, we are not contributing to the solvency deficit. If we were required to contribute, that would, again, be $6.2 billion over five years, and that type of financial strength is not there. The corporation's challenges will simply continue to mount in the absence of viable solutions that can be implemented and that play to the core strengths of our corporation.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Yes, I think you've summarized many challenges. Would you say that Canada Post is at a crossroads in terms of the declining number of letters it is processing while the increase in parcel post does not compensate? Would you say you need to adjust your business plan radically in the coming years? Is it part of your intention? As Ramez mentioned, you had a five-year plan, your action plan in five points. How do you see the future of Canada Post with this corporate challenge?

The solvency deficit is a sword of Damocles.

This is actually $6 billion over your... it's almost a year of net revenues. How do you see this challenge from a corporate perspective?

[Deepak Chopra]

Mr. Chair, we are indeed at a crossroads, and we are not alone. Yesterday, the United States Postal Service released its quarterly results and announced a net loss of $2 billion. The U.S. Postal Service, whose revenue grew marginally, still reported a $2-billion U.S. net loss. That shows that the issue is not unique to Canada.

The issues of technology, the Internet, and online substitution are real and universal. We're seeing that in other postal administrations where the challenges are similar. But as I mentioned in my opening remarks, the solutions are very much unique to the countries, the people, the environment, the climate, and the geography. Every country has a unique set of circumstances, and is finding solutions that are unique to them.

We are indeed at a crossroads.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Welcome, Ms. Trudel, to our committee. I understand you will be taking the questions for the NDP today. You have seven minutes.

[Karine Trudel, NDP, Jonquière, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for joining us today.

Mr. Chopra, you said earlier that Canada Post had to find new market shares and develop a new strategy. You also mentioned that many people pay their bills online. I would like to hear your thoughts on postal banking.

We often hear that Canada Post could provide a banking system at its postal offices—so in a number of small municipalities that still have a postal office. Could you tell me whether you have looked into that strategy?

[Deepak Chopra]

Given the announcement our minister made last Thursday for the independent panel to look at all options, we are participating in that process and at this stage we are keeping all options open. The right way is to look through the lens of affordability, financial sustainability, opportunity to grow revenues, and opportunity to be able to discharge our liabilities in the pension plan. Earlier it was mentioned that the solvency deficit of our pension plan is larger than the entire revenue of the corporation. As you can see, the challenges we are facing are quite large, quite monumental.

We have also made progress on addressing some of those challenges and we demonstrated that, by using our core competencies, by using our core skills of delivering parcels. Many Canadians may not remember the famous Eaton's catalogue, the mail order. In fact, The Hockey Sweater, the famous book that has been read to every child in our country, was based on the mail order business of the 1800s and 1900s. Those core skills have now given us an opportunity to look at a growth area that we embarked on five years ago, and it has so far proven very effective. In fact, it was much easier for our employees to implement and embrace, and it is demonstrated when large customers like Amazon compliment us during peak period deliveries in the Christmas season, in the holiday season.

We are looking at opportunities so far that have been part of our core strength, but as we move forward, the independent panel will be looking at ideas and suggestions, and our goal remains to work with them on making sure those ideas are evaluated appropriately with good, sound, fact-based decisions, and we welcome that process.

[Karine Trudel, NDP, Jonquière, QC]

Thank you for your answer.

However, a study was carried out by Canada Post on postal banks. You said in your presentation that you were offering the committee your cooperation. Does Canada Post plan to submit that study, so that the committee or the task force may benefit from it and make an appropriate decision?

[Deepak Chopra]

Mr. Chair, the corporation looked at banking almost five years ago and at that time we decided it was more appropriate for us to focus our energies on the core strengths of the corporation that we already had and to build on those. At that time, we felt we should be focused on growing parcels, and, as you will see in our annual report, over the five-year period we have grown that parcel business from approximately $1.2 billion to approximately $1.6 billion. That is a significant improvement, but as we move forward we will be working with the committee to work through all options.

With regard to your questions on the release of the report, we have a policy of keeping the commercially sensitive information as commercially confidential.

[The Chair, Conservative, Tom Lukiwski]

You have two and a half minutes left.

[Karine Trudel, NDP, Jonquière, QC]

I will be brief, Mr. Chair.

Should the government give you a directive to restore home mail delivery following consultations with Canadians, will you respect its will?

[Deepak Chopra]

Our goal is to participate in the independent review panel process as a corporation that has a lot of knowledge about our business, providing all the facts, all the pros, all the cons, and participate in that process not only on that option but on all the other options that will emerge. As we participate in that process, the guiding principles, as announced by the minister last Thursday, also govern the guiding principle of keeping Canada Post financially self-sustaining. It is extremely important for not only Canada Post employees but for Canadians that this corporation, which has served them for 253 years, remain relevant for the next generation of Canadians. We will be working with the independent panel. We will be looking at all options and will participate in that, and options that will meet the criteria as set out by the minister will be the ones that will be reviewed.

We look forward to the final recommendations. We look forward to the final report and to participating in that process and then building our corporate plans based on the final findings of the independent panel as well as the committee's reviews, which will take place as part of the second part of the process.

[The Chair, Conservative, Tom Lukiwski]

Thank you, Mr. Chopra, very much.

Madam Ratansi, please, for seven minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you all for being here.

My question goes back to the five-point plan. You arrived in 2011, and the five-point plan was prepared in 2013. What sort of consultation did you do when you decided to eliminate door-to-door delivery?

[Deepak Chopra]

Our plan in October of 2015 was suspended. Now our energies are more focused on making sure—

[Yasmin Ratansi, Liberal, Don Valley East, ON]

No. Sorry, Chair, I asked what sort of consultation did you do, because we as parliamentarians have to respond to our constituents who were yelling at us when we were at their doorstep because you had, in their opinion, unilaterally decided to eliminate door-to-door delivery. I don't want to know about going forward, because we know why the going forward came. The going forward came because of the issue that your five-point plan did not consult the constituents.

You talk about having to serve Canadians, but Canadians were not served when you unilaterally, according to them, decided to do it. I need to understand what sort of consultation you did at Canada Post, so we understand the history behind your consultation process. Going forward, when the task force gives us its recommendation, then we know what we are doing, because we need to start from phase one.

[Deepak Chopra]

As far as Canada Post services to Canadians, as we have been evolving in the postal service, Canada Post has been providing the same services to Canadians all across the country. I think it is important to understand—

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Mr. Chair, please. I asked a simple question. My question is, what consultation did you do when you decided... In my riding, which is an urban riding, people suddenly got notices that mail would not be delivered. As we were door knocking, we were asked, “hey, why are you stopping?”

I want to know who was consulted. If you can answer me whether it was the general public, or if it was management's decision, that would help me. That's all.

[Deepak Chopra]

I think it is important to understand that, when we are providing any service to any Canadian, from time to time we change service. We change service from one rural post office to another post office. The processes of moving our service to all Canadians—whether they are getting it at the retail store, whether their mail is being delivered to a rural post office, or whether their mail is being delivered to a community mailbox—have been in place for a very long time. Those processes continue to guide us as we deliver nine billion pieces of mail. We deliver over 200 million parcels.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Mr. Chair, I still am not getting a simple answer.

[The Chair, Conservative, Tom Lukiwski]

Perhaps I can make a quick intervention here.

Mr. Chopra, I know what you're trying to say, but whether the answer will be palatable to Madam Ratansi, I don't know. That's not the question. The question is simply did you or did you not, as a corporation, do any consultation before making the decision to end door-to-door delivery. If you did not, that's your decision. That can be debated—

[Yasmin Ratansi, Liberal, Don Valley East, ON]

That's fine.

[The Chair, Conservative, Tom Lukiwski]

Madam Ratansi just wants to know was there consultation with Canadians, or was this strictly a management decision.

[Deepak Chopra]

Mr. Chair, any corporation operating in the 21st century that serves millions of customers has to be sensitive to the customer needs, and sensitive to what Canadians need—