Government Operations Committee on Sept. 21st, 2016

[Deepak Chopra]

I think the mail has changed its shape and size over many decades, from postcards to letters, from parcels to packets, and so on. What we are finding now is that it's going through the same change again, with parcels growing. The challenge is not that parcels are growing. In fact, that's the best thing we have seen for our corporation. The challenge is that we have to transition a mail-centric network that was designed to deliver mail to adapt so that it can deliver mail and parcels.

You raise a very interesting point about parcels being delivered every day. Our expectation, in fact, is not even next day. It's the same day for parcels. For mail, there is this assumption that it's okay to take a couple of days.

From a receiver's perspective, it continues to be the view that Canada Post only delivers mail. That's our heritage. It's a very common myth that what comes in the mail is only letters. Part of our challenge is also to educate Canadians that what's coming in the mail has also changed. With that, we can change the way we deliver, the way we support our retail network, and the way we support our support structure.

We think that if we can address some of the legacy structural issues, which is what you were commenting about—the cost differentials with a competitive sector—through this transformation, we believe we can compete in the parcel sector. We are already competing. It's a $1.6-billion business.

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

Okay. Let me get to the human resources.

Yesterday we learned that a large portion of your workforce is potentially retiring within the next five years. Can you comment a bit on this workforce that needs to be treated, I would say, with all respect, and also in regard to your needs? Is there, let's say, a possible match in attrition? I would like to hear your views on this.

[Deepak Chopra]

One of our guiding principles on the transformation we embarked on was that we would work with the workforce within the framework of our collective agreement and also within the framework of the retirements and the attrition coming up in our profile. Our average age for employees is 49 years. In the next five years, if past retirement patterns continue, we expect over 16,000 employees to retire. When we were transitioning the mode of delivery from door-to-door to community mailboxes, the changes in the workforce were all dealt with through attrition.

We are very mindful that it's an important institution. It has 50,000 employees who count on their livelihood. These are important middle-class jobs. But in order for it to have a long-term future and in order for it to have the sustainability for those jobs, it has to evolve—

[The Chair, Conservative, Tom Lukiwski]

Thank you.

[Deepak Chopra]

—and that is the change that is essential as part of the transformation.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Ms. Trudel, you have the floor and you have seven minutes.

[Karine Trudel, NDP, Jonquière, QC]

Thank you, Mr. Chair.

First of all, with your permission, I would like to table the following notice of motion:

That the committee ask the task force that drafted the report on Canada Post in the Digital Age to submit to the Standing Committee on Government Operations and Estimates all submissions, reports, briefs, notes, statistics, lists of witnesses and experts, statements, notebooks, photographs, audio recordings and audio visual materials used to produce the said report.

[The Chair, Conservative, Tom Lukiwski]

Thank you.

Continue, please.

[Karine Trudel, NDP, Jonquière, QC]

I would like to thank the Canada Post representatives for being here with us again today. This is the second time we have had the opportunity of meeting with you.

Yesterday, we heard the members of the task force who gave us the report you must certainly have consulted. I would like to know if you consider that all of the figures in their report are accurate.

[Deepak Chopra]

Much of the data in the report is based both on our financial projections and on task force outside advisers Ernst & Young validating them. A lot of the assumptions and the financial data, we believe, are materially and directionally in line with our projections.

[Karine Trudel, NDP, Jonquière, QC]

Thank you.

We also gained a good understanding of Canada Post's financial situation. Several suggestions were made to increase revenue, such as adding banking services. Canada Post even did a study on that.

Did you give the task force a copy of the study Canada Post did on banking services?

[Deepak Chopra]

We shared all of the work with the task force that Canada Post has in all of its areas of research, and the task force has done its own assessments, its own independent work, to come to the conclusions noted in their report.

[Karine Trudel, NDP, Jonquière, QC]

We had asked to be allowed to consult that working document, that is the study Canada Post did on this topic. A lot of the text had been blacked out and we were not able to consult it. When I put my question to the task force, they were unable to answer me. So I would like to know if the Canada Post study was really given to it in its entirety.

[Deepak Chopra]

I'll ask my colleague, who spent a lot of time on the banking file, to answer this question.

[Wayne Cheeseman, Chief Financial Officer, Canada Post Corporation]

Yes, the task force independent experts had access to all of the reports and analysis that we had conducted in 2010 on the banking analysis.

[Karine Trudel, NDP, Jonquière, QC]

Do you think that having a postal bank within Canada Post offices—several municipalities have this type of service—would allow Canada Post to offer another type of service that would be viable and help it financially?

[Wayne Cheeseman]

We looked at and conducted our review of banking in 2010, and when we looked at it and considered a number of pieces of data, we felt that the risk that was involved in the corporation in terms of getting into banking could not be justified by the potential benefits, if there were any, to carry on with the banking. We decided to focus on our core areas of expertise, including parcels and revitalizing direct marketing.

[Karine Trudel, NDP, Jonquière, QC]

Yesterday, I mentioned at our committee that the banks had made profits of $135 billion. And so I find it deplorable that that possibility was not studied further. In its report, the committee mentioned 37 new avenues. Did Canada Post examine the 37 avenues the committee mentioned in its report?

[Deepak Chopra]

Canada Post has to play to its strengths, and every organization has core competencies, core strengths. I think Canada Post is a logistics and delivery organization. We focused on that. We have demonstrated, by growing our parcels business by over $400 million in less than five years, that those are the areas that are more successful, and we can have a better outcome for the long-term sustainability of Canada Post.

There are financial services that Canada Post already plays in—for example, money transfers. In many communities across the country, Canadians who send money back home find it expensive to transfer money using other sources. Our MoneyGram program is very widely used and is a service that we believe fits into Canada Post's competencies. Over the years our money order program, which goes back over 100 years in the postal community, has evolved to a much more efficient digital money transfer system. Here is a product that is something we already do. We also have prepaid debit cards. We distribute those through our branches, and those Canadians who are not able to have a credit card are able to purchase a prepaid debit card.

There are services that would make sense in the context of where our core competencies and capabilities make sense. Then there are services that are well served. As we saw in the report as well, Canadians are well served by banks and credit unions. It's not an area where...now that an independent panel has had a chance to look at it in depth, not just from five-old data, which is already stale in the digital economy we live in. With FINTRAC and new technologies, and the banks facing new types of regulatory challenges, technology investments, these are large decisions. That is why I mentioned earlier on that we look to this committee to debate, to reflect on the discussion paper, and listen to Canadians. And if that's an option, that better belongs in the committees.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Whalen, go ahead for seven minutes, please.

[Nick Whalen, Liberal, St. John's East, NL]

Thank you very, Mr. Chair.

Thank you all for coming.

Clearly, I'd think we'd agree that the brand of Canada Post is strong and it's paramount. It allows it to attract its customers for its delivery and logistics business. Without the trust of Canadians, that business would not exist. People would not trust Canada Post to do the delivery and logistics it does without it.

When we look at what has happened over the course of maybe the last two years, at least from my perspective, there seems to have been a whittling down of that trust in that a five-point plan was put to Canadians, imposed upon them, and it lacked public support. There was certainly a great deal of consternation during the election.

Then again this summer, on both the corporate side and the union side, the disagreements over labour put a lot of mistrust into Canadians' hearts about whether or not they should continue to rely on Canada Post to meet their payroll needs, their banking needs, their chequing needs, and their delivery needs. They moved to alternative sources of delivery or simply decided to transfer more of their business, perhaps prematurely, to electronic methods. There is a certain amount of concern.

I want to focus just a little more on the financials here, to try to get a sense of opportunities that might not have been canvassed by the task force but that might be available. When we look at their report, they say there's $400 million of potential savings, which includes $80 million already achieved, by going to community mailboxes. We have conversion of 80 of the highest-volume corporate post offices to franchises for savings of $177 million. Those two ideas seem to be fairly independent.

Would you agree that both of those things could be implemented independently and those savings would not have so much of an overlap, in terms of the benefits to Canada Post?

[Deepak Chopra]

As I mentioned earlier on, this is work for a task force. Once we understand what the complete package of transformation looks like, we will then have to assess the overlap of implementation or for that matter any areas where savings may overlap.

I think it's important that in the end we understand the complete package.

[Nick Whalen, Liberal, St. John's East, NL]

Mr. Chopra, would you agree that at least with community mailbox conversion and the franchising of the outlets there's not a huge amount of overlap in your operations in those two ideas?

[Deepak Chopra]

That is a fair statement.

[Nick Whalen, Liberal, St. John's East, NL]

Okay. Fair enough.

In terms of alternate-day delivery, that seems to be something that would have a greater impact with respect to current door-to-door delivery. Those savings would not be entirely realized if we moved to community mailbox conversion. Is that a fair statement?