Government Operations Committee on Sept. 20th, 2016

[Kelly McCauley, Conservative, Edmonton West, AB]

Madame, we're short on time, and I have one more question. Please go ahead, but please be brief, though.

[Krystyna Hoeg, Member, Task Force on Canada Post Corporation]

Just to reiterate what Françoise said, we did look at that.

It was a workable plan at the time. Times have changed. They change very quickly. Due to an increased need for consultation, particularly on the community mailboxes, the numbers changed somewhat, but directionally they were correct. Our paper basically took those facts and took them forward from a financial perspective.

[Kelly McCauley, Conservative, Edmonton West, AB]

Perfect. Thank you. It sounds as though the five-point plan was generally a good step toward sustainability.

Not that I am advocating for it, but one of the items suggested to cover off the pension deficit was selling off assets such as Purolator. Did you look at that at all, or was that just not considered?

[Françoise Bertrand]

The pension—

[Kelly McCauley, Conservative, Edmonton West, AB]

No, to cover off the deficit. Did you look at the sale of assets such as Purolator or other—

[Françoise Bertrand]

Krys will answer that one if you wish.

[Krystyna Hoeg]

Yes, we obviously spent a fair amount of time on the pension and the solvency deficit. We looked at the fixed assets and Purolator and drew no conclusion except for the fact that it is optional, to be reviewed. Certainly our recommendation is to look at further synergies with regard to Purolator, but there are any number of fixed assets that may be redundant and could be monetized to solve, or help solve, the deficit.

[Kelly McCauley, Conservative, Edmonton West, AB]

Perfect.

On the long-term financials, I looked at Canada Post's revenue projection of 2026, and they expect, despite everything we know—I think you've even commented on it—an optimistic 10% increase in revenues. I don't see that happening.

Have you discussed, looked at, or studied what you think are their real revenue projections for 2026? I should just put everything to Ms Hoeg. The three of you are excused.

[Krystyna Hoeg]

We certainly did. EY did a very robust scrub of the numbers that Canada Post gave us, and it was under a status quo scenario. They thought the numbers within the projection period were reasonable and materially correct and directionally correct. However, any projection, as we know, particularly one going out to 10 years, is going to be, by its nature, inaccurate.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right.

The EY numbers of course show, as you've mentioned, status quo, as in no change in the community mailboxes. Did they do up another pro forma based on some of your suggestions about community mailboxes, synergies, etc.?

[Krystyna Hoeg]

Not within the outlook period, but clearly we had a look with EY as to sensible steps that could be taken, including some of the options that we are putting forward, and basically decided that they are probably insufficient on their face and that a much more aggressive transformation would be required in order to render Canada Post financially self-sustainable.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Ayoub, you have five minutes. Please go ahead.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here today and for all their work on this file.

I am very pleased to see all the energy you have put into providing us with information. I am also very proud to be part of the committee that will travel across Canada and delve further into these issues with the public. I can tell you in passing that, more than two years ago, I witnessed the end of home mail delivery and the switch to the new mail boxes in the five affected cities in Canada.

You were appointed to your roles not because things were going smoothly but because we wanted to examine the situation thoroughly, and in particular because there was a crisis in confidence. What I witnessed was that, within a period of 24 or 48 hours, the municipalities were informed that community mail boxes would be installed and home mail delivery stopped.

I would like to get back to the issue of planning. The Internet, email and electronic money transfers using new technology have been around for a number of years and they are growing exponentially. The five-point action plan was developed a number of years ago. Why was this plan never implemented? What is your opinion of this action plan?

It was touched on briefly earlier. I am a bit concerned that this plan may not have been aggressive enough or adequate for 2016. It is fairly recent after all. It should have been implemented but the process was stopped.

I would like to hear your comments on that.

[Françoise Bertrand]

What you are saying is true. The Internet has been around for some time, but for all technologies, there are early adopters and users. At some point, a normal distribution is reached and a large number of people change their behaviour. That said, there are always some people who strongly resist change.

The same applies here. But that is where the trend becomes exponential. It is getting faster and faster. People are encouraged to use the Internet now. Companies are saying they will charge if postal services are used. There is truly a change in behaviour. Above all, the pace is accelerating. What seemed sufficient in order to adapt one year at a time is no longer sufficient. Some parts are still viable with modifications.

I will go back to your comment about cities. In downtown areas, it does not work. Moreover, we know full well that people always resist change. In order to successfully implement change, a lot of communication and information sharing are needed.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Information sharing and communication are what was lacking in this regard. The plan seemed to have been decided in advance. It was imposed, but it is not sufficient to meet the objectives. The goal was to become autonomous and to preserve Canada Post and its high-quality service.

[Françoise Bertrand]

We have no opinion on the measures taken, but Canadians addressed these matters in the discussion groups. Everyone will know, for example, that Canada Post's financial picture is not rosy. Yet it was by addressing this that we could explore the options. When we met with the discussion groups and even with the stakeholders, they said they wanted more. It was probably the municipalities that were most vocal in this regard.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

We have to look at it from the municipalities' point of view. They were the first point of contact with respect to this interruption. It is normal for citizens to complain to their municipal council that they could no longer get their mail or that their post office was closing. In such cases, the municipalities are clearly at the front lines.

[The Chair, Conservative, Tom Lukiwski]

That is it for now. Perhaps in the next round, Mr. Ayoub, you can continue.

We'll go to Mr. Blaney for five minutes.

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

Thank you very much, Mr. Chair.

I missed part of what my colleague from the NDP said, but I got the gist of it. Once again, I must say that the work done was excellent. It is essential for society as a whole to adapt to reality, to adjust its financial and technical resources, and to evolve. I believe this is the mandate given to our committee, but also to your task force.

Now that you've seen the brutal reality—and of course you've mentioned le déficit de solvabilité, the pension deficit—do you think you will reach your objective to come to the government with a viable solution, and more specifically, one that is financially self-sustaining?

[Françoise Bertrand]

As I've said—

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

Do you understand what I am saying?

Do you think that you will be able to find a solution to this, that you will be able to say that you have found the right formula and that there is in fact work to be done?

[Françoise Bertrand]

There is no secret to Caramilk. That's why we're bringing to your attention some options that can bring savings and a bit of revenue that could do the bridging necessary before going into a more in-depth realignment of the institution.

I think it's important for all to remember that Canadians don't want layoffs. They want the institution to remain a public service. They're satisfied, and they feel it's an important institution in Canada.

It is really a changing of the organization that has to be planned, in a sense, from what we've all gathered as information. It cannot be done overnight. There isn't one bullet that will do the job. Many actions have to be taken, some being short-term and others having a long-term view.

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

I didn't mention cutting jobs, but there is attrition and there are other mechanisms. Are you willing to explore these avenues?

[Françoise Bertrand]

Thank you for the question. My friend here is all prepared to answer, because it's an important one.

[Marena McLaughlin]

We did really look at that. When we say that 70% of the labour costs are fixed costs, there is very little room to manoeuvre, unless you do a complete change in the governance and the approach.

As far as the location is concerned, we're saying that the window is the perfect window. It's open right now. It's an opportunity for the union, the corporation, and the stakeholders to look at the whole situation. First, the population is 49 years old and up. They constitute 64% of the workforce. Another 4% are over 60 years old. When you look at the demographic of the workers, you see that almost 70% will be leaving in the next four to 10 years.