Government Operations Committee on Oct. 7th, 2016

[The Chair, Conservative, Tom Lukiwski]

I call the meeting to order.

Good afternoon, ladies and gentlemen, colleagues. To our panellists, welcome.

Sorry. I don't speak French.

I'll be making my opening remarks in English.

You're undoubtedly aware that the minister responsible for Canada Post, the Hon. Judy Foote, has initiated a very extensive consultation process concerning the future of Canada Post. Phase one of that consultation process was the establishment of a task force whose mandate was to examine the financial viability and sustainability of Canada Post.

Phase two is why we are here today. We are conducting a cross-country tour of the country to talk with Canadians, organizations, and municipalities about their views on the future of Canada Post and try to elicit recommendations and suggestions from individuals and organizations about what they see the role of Canada Post to be in the future. That's why we are here today.

Without further ado, I'll get into the procedures. It's very simple.

Each of you has been asked to deliver a short five-minute opening statement. I understand Mr. Brun and Mr. Mourinet will be splitting their time, but it's still five minutes in total. If you care to look up occasionally during your presentation, you'll see that when you get to the four-minute mark, I'll give you the indication that you're at four minutes, so you'll have ample time to wrap up your comments. Should you not be able to complete your full five minutes, I will, unfortunately, have to be fairly strict with the five-minute limit, since we have a number of questions that will be coming from our committee members and we have a very tight schedule.

The process among committee members is very simple. The first four questioners will have seven minutes for questions and answers; the last two interventions will be five minutes. That's how we're going to proceed.

Your comments will form part of our final report, which will be tabled in Parliament sometime before the end of this year.

Without any further ado, I will turn the floor over to

Mr. Mourinet and Mr. Brun, you have five minutes.

[Bernard Brun, Director, Government Relations, Desjardins Group]

Thank you, Mr. Chair.

My name is Bernard Brun. I'll start with some opening remarks and a short introduction of Desjardins Group.

First, thank you for inviting us and for listening to us this afternoon. It's especially meaningful since Desjardins Group started here, in Lévis, over a century ago. Alphonse Desjardins founded the first caisse populaire. Since that time, the history and the city, in addition to economic development and the presence of financial institutions in Quebec, have been thoroughly intertwined with the evolution of Desjardins Group.

Desjardins is the leading cooperative financial group in Canada and the sixth largest cooperative financial group in the world, with assets of about $260 billion today. It's a completely cooperative group, meaning we provide a full range of financial services to all our members and clients. We're located in all regions of Quebec and across Canada. Desjardins Group has about 47,000 employees in total.

It's worth noting that Desjardins Group is considered North America's strongest bank, according to Bloomberg News.

I also want to mention that the name “Mouvement Desjardins” in French is well chosen. We're constantly evolving. We must adapt to the changing reality of the environment, in terms of both the needs of our members and the evolution of the environment.

I'm joined by David Mourinet, Director of Administrative Services for Desjardins Group. He'll talk more specifically about the business relationship Desjardins Group is maintaining with Canada Post, as a service user, and about the changing use of the services.

We'll then be pleased to answer your questions.

Thank you.

[David Mourinet, Director, Administrative Services Directorate , Desjardins Group]

Mr. Chair and members of Parliament, thank you for meeting with us in Lévis.

Canada Post is currently a major service provider for Desjardins, since we mail about 108 million letters a year. In general, the letters are mailed by our network of caisses or by the Desjardins card service, which represents the vast majority of clients with the exchange of cards, whether they are bank cards, Visa cards, or another type of card.

Desjardins Group has exactly eight distribution centres in Canada. Each distribution centre manages a high volume of letters, documents or packages. Recently, we expanded out west by acquiring State Farm.

Desjardins has started a major project to digitize all its documents. In the past two years, our shipments have decreased by 5%. We have a number of major global digitization projects. In the next five to ten years, most documents will be completely digital. We estimate that, within at least five years, the decrease will result in 30% fewer Desjardins shipments. The number of documents shipped by Canada Post, our main service provider, will decrease by about 30 million.

This major streamlining is being carried out as a result of client demand and the changing technology and markets. People want information as quickly and efficiently as possible. The digital solutions are currently the most suitable and least expensive for us and our clients.

As you know, Desjardins Group must deal with the changing technology and behaviour of its members, who use digital technology for their financial transactions.

All financial institution activities are affected to a certain extent by the changing technology and mail services. It's not only Desjardins members. All people who have bank accounts will use digital technology.

I'll let Mr. Brun finish.

[Bernard Brun]

In closing, thank you to the committee for allowing us to speak about the issue. We have a great deal of information, and Desjardins Group is there to answer your questions and give you things to consider.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Mr. Quesnel, you have five minutes.

[Maurice Quesnel, Director General, Chambre de commerce Baie-des-Chaleurs]

Thank you.

I reviewed the report submitted by the Canada Post review task force, which consists of Ms. Bertrand and three other people. I understand that mail is a very important service for the public and for businesses. The report also clearly states that the satisfaction rate is very high as a result of the service's reliability. I am one of those people who receives all bills online. I use Canada Post's epost, which is becoming larger and larger. More and more people are using the service.

The options presented by the group are quite good.

Community mailboxes are a very realistic option, and they must be maintained. However, we must take into account that they can't be installed in certain locations. I fail to see how clients who have little or no mobility could travel to pick up their mail. I also fail to see how community mailboxes could be placed in the downtown areas of Canada's largest cities. There is already an ongoing traffic problem that I don't think will improve.

I completely agree with converting the highest volume post offices to franchise outlets. However, the offices in rural regions must be maintained. I've lived in Montreal, Ottawa, Quebec City and Sherbrooke, and I have been living in Gaspésie for eight years. I've toured the regions. I've also lived in Lac-Brome. As a result of my work, I have a slightly different view.

In Gaspésie, where I've been working for the past eight years, there are mailboxes and the franchise outlet is very important for the population. People go there every day. The doors are open 24 hours a day, seven days a week. As a chamber of commerce, we use the direct mail service to reach businesses. It's much easier and less expensive. I think these services should be maintained and these jobs should be protected because the loss of 100 jobs is much more significant in the regions than in the major cities.

Concerning alternate day delivery, I would lean more toward two days a week, Tuesday and Friday. It would certainly save money. The board of directors discussed it. That's more or less the vision I want to share with you.

The further streamlining of processing operations is essential, in addition to the synergy with Purolator. Those are the two most frequently used services in rural and remote regions.

However, I see a problem with selling advertising in the retail network. The smallest businesses are already at a disadvantage compared to retail giants. I can't see how “Amazon” could appear on a Canada Post truck. In addition, there's a tax issue. No measures are taken to collect taxes when people purchase items from abroad.

Regarding the assessed and unquantified options, increasing prices as a strategy to offset increasing costs could be detrimental and would certainly result in more people using email to receive their bills. In any case, all our suppliers encourage us to use email and the Internet to receive our bills.

A review of labour costs was certainly conducted. You saw it in the recommendations. If not, that type of review is required. All businesses review labour costs each year.

Lastly, postal banking is not the way to go. There are already enough banking services in Canada, and competition is fierce. A number of jobs in the sector have already been eliminated and are continually being restructured.

I won't talk about the postal services in France, where I go regularly, except to say there is also a decrease in that area.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Mr. Harvey, you have five minutes.

[Dany Harvey, President, Coopérative d'habitation Ludovica]

Thank you, Mr. Chair. My thanks to the committee members for inviting me.

My name is Dany Harvey. I am the president of the Coopérative d’habitation Ludovica. We are a housing cooperative in the Quebec City region with 32 units, 11 of which are occupied by those 60 years of age and older or by those with reduced mobility.

I speak on behalf of the cooperative, of course, but also on behalf of a group of about 100 housing units that is in the process of being established. So clearly, the matter of mailboxes and the elderly is somewhat of a concern for us.

In our opinion, it is critical to find out Canada Post’s vision for the future. We know that, in 2030, about one person in four will be 65 or older. So, of necessity, there will be increasing pressure on long-term care residences and the like.

There is also a growing desire on the part of the elderly to remain in their homes. This is a reality that must be taken into consideration: the population is aging and people are living longer.

Another reality is that families are much smaller. Of course, support from loved ones and the family is important for the elderly. When parents have one child or four children, it is harder to go and visit mom or dad. We see this reality daily.

My presentation will be in two parts. First, I will talk about community mailboxes and the problems they pose, and then about letter carriers. For us, community mailboxes get in the way in some places. We have seen, in some cases, that their location creates tension. Our cooperative is in an urban area, in downtown Quebec City. It can be difficult to install blocks of 30, 50, sometimes 150 mailboxes. It is also difficult to find places to put them.

There is also the whole matter of garbage. Some locations literally become garbage cans rather than a postal service location. That is deplorable. We also must not overlook winter conditions. Snow has to be cleared from the boxes and that is not easy when you consider what is around them. You also have to be able to get to the mailbox. An elderly person who has to cover one or two kilometres to get there, either on foot or by car, may find it difficult. If they choose the car, they also have to consider the ecological footprint they are leaving.

Another basic aspect that concerns us is safety. As soon as a large mailbox is installed, data becomes centralized. If thieves want to steal that data, it is much easier for them to go there and make off with the box.

I know that Canada Post wanted to provide an exemption for people who have no other choice but to receive their mail at home. We thought about that; it can cause problems. Why? Sometimes, letter carriers are followed by ill-intentioned people who want to steal their keys. By following a letter carrier, a thief can discover which people are in vulnerable situations. If those people have their mail delivered at home, a thief can more easily target them. For us, that is one more reason to choose home delivery over community mailboxes.

The profession of letter carrier must also be considered. A survey conducted in 2015 shows that letter carriers have an 87% approval and trust rating with Canadians. That says a lot; it is huge. In public opinion, they are practically at the same level as firefighters, paramedics and nurses. Letter carriers inspire confidence and have credibility.

Some countries have programs that conduct door-to-door checks, a kind of neighbourhood watch, to make sure that vulnerable people are safe. I know that, in the 1980s, Canada had such a program—I think it was in 1983 or 1984. It could simply be a matter of saying hi to people, cell phone in hand, to check that all is well. That is done in some countries. The letter carrier is very often the only human contact that a lot of older people have during the day. Letter carriers know their routes. They know what is happening there and can see when things are not right.

If a person has not been heard from for three days, letter carriers are very often in the best position to know what is happening. Their presence can increase security, especially with an aging population.

If you have questions, I will be pleased to answer them. There are other aspects that I would like to have dealt with. However, I thank you very much for listening to me.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Ayoub, you have the floor for seven minutes, please.

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

Thank you, Mr. Chair.

My thanks to the witnesses for joining us. It is a great pleasure to come back to the Quebec City region, to Lévis in particular.

My first question will be for the representatives of the Mouvement Desjardins. I am very pleased to see you and to be able to ask you some questions.

In your presentation, you said that you foresee a decline in your mailings. Thank you for telling us about that. I imagine that the decline is due to a combination of two factors, your clients’ changing habits and a major increase in technology.

How do you see the arrival of a potential competitor?

Actually, it might be more of a partner than a competitor. I am sure that you have heard of postal banks, which is a solution some suggest for the future of Canada Post.

How do you see the arrival of services like that in the regions?

There is a lot of discussion about remote regions. In some of those regions, you no longer have a presence, or your presence is smaller, for various reasons. You are the first bankers to come to talk to us. In your case, we are not talking about banks, but rather about credit unions. Whatever the case, you work in the banking industry or not very far from it.

[Bernard Brun]

Thank you, Mr. Ayoub.

Yes, it is always a possibility. I will let my colleague answer the question about our fluctuating volume of mailings.

As for Desjardins, it is important to note that we are more present in Quebec than any other financial institution, such as the major banks. We have 1,130 points of service and outlets and we have a presence in all regions. About 30% of those outlets and points of service are located in sparsely populated areas.

You mentioned the evolution in services. As Desjardins is a cooperative, our role is first and foremost to serve our members. However, we are not a not-for-profit organization. We have to generate enough revenue to ensure the sustainability of the group as a whole.

Desjardins still has a presence in the regions, but the services have changed a great deal, especially in the last few years. For services at the counter—

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

Mr. Brun, since I only have seven minutes, can I ask you to go back to my question?

[Bernard Brun]

Okay.

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

I wanted to know how you saw the arrival of this potential competitor, which could also be a partner.

[Bernard Brun]

Yes.

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

There is more than one possibility. That said, I want to know how you see the potential arrival of a postal bank run by Canada Post.

[Bernard Brun]

We do not really have an opinion about it because we do not see it as competition per se.

However, you will have to ask yourselves if it is a genuine solution for Canada Post. In terms of the business model, I am not sure that it is a possibility or a moneymaker or that it would solve its problems.

Desjardins sees it as a service provider, but not necessarily as a competitor. It would just be a new way of serving the public.

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

Do you have anything to add, Mr. Mourinet?

As I understand it, your goal in coming here today was to let us know that your use of the mail is declining.

Is that correct?

[David Mourinet]

That is correct.

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

I did not hear anything else in your presentation. You talked about the Caisses Desjardins, but if anyone here does not know about them, we have a problem. Everyone knows about the Caisses Desjardins. Your use of the mail is declining.

Given that we are talking about the future of Canada Post at the moment, I would like to know what your testimony today contributes.

[David Mourinet]

The reduction in mailings that we are going to implement is at least 30 million mailings per year. That will make a difference. Those are revenues that Canada Post will no longer have. We are going to continue to send documents and parcels for several more decades.

Desjardins members asked for things to be easier, quicker and more efficient. The mail is not a service that most members have asked for. The remote regions indeed pose a problem and we are going to have to connect to them. Clearly, we are ready to maintain a structure that is broad enough to cover everyone, but the fact remains that there will be a decline.

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

Have you been able to gather information or statistics about your members’ preferences in terms of technology, according to their geographical location or age group?

[David Mourinet]

No, not yet, but the research is ongoing. We have a team that does that kind of research. We targeted Greater Montreal, but, for the regions, we are starting to look at what we have to do to find the best solution and how we can adequately serve each member. Yes, we have a process in place, but, at the moment, we have no official figures that we can give.

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

So you are in favour of the program that Canada Post has put in place. You mentioned that, for you, there is a decline. So you see the change. Canada Post is in the process of reacting to the decline in the mail. I feel that you are going through the same thing. Is that what I am to understand?

[David Mourinet]

For us, yes.