Government Operations Committee on Nov. 3rd, 2016

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Is it possible they are folding in that insolvency deficit into the costs?

[Geoff Bickerton]

No. The numbers we're looking at here are actually taken from Canada Post's document, which they provided to us in bargaining. It includes total compensation, including all the cost of pensions, all the cost of future benefits, based on productive hours, which includes vacation time, rest periods, you name it.

What you should know is that every number we have provided here is from Canada Post, unless we say otherwise. We have provided some numbers from the Conference Board, but everything else in our document is from Canada Post.

We have no disagreement with the numbers they produced. However, their predictions and how they portray the situation is often wildly inaccurate.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I do agree with you that the numbers can vary greatly. We heard that yesterday as well from Mr. Cheeseman. Plus or minus $50 million, it can go either way on a $6-billion chiffre d'affaires revenue number. I have certainly seen in my career that those numbers can change, based on accounting adjustments, and so on.

What I really want to ask is the following. Going forward, since we need to drive those revenue numbers, is the union open to being flexible on things such as pension benefits, if there were an option to decouple the pensions from Canada Post and operate them separately but with joint governance? Are you open to the sharing of risk that it would entail?

[Mike Palecek]

As we've informed both this committee and Canada Post, we're willing to discuss any of the options put forward that don't entail cuts to our members' benefits and retirees' benefits.

That said, I think the task force has put forward a number of options that would accomplish that, and we would like to discuss them for sure.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

So you are open to the kind of flexibility that would be needed to negotiate more competitive labour costs going forward?

[Mike Palecek]

I think we already have negotiated more competitive labour costs. Let's be clear: Canada Post is perfectly capable of competing right now in the parcel market, and that's evidenced by the fact that they deliver two out of three parcels in this country right now. Canada Post has no problems competing.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I have another minute. Going to what we discussed about opening up the services, if we looked at Canada Post's core competency, it really is in the delivery of letter mail, first, and parcel mail, second.

Do you see a way forward? You've talked a lot about postal banking, and there are a lot of pros and cons with that. Do you see a way forward in just concentrating on the core competencies, or do you see Canada Post as absolutely needing to have postal banking to survive?

[Mike Palecek]

Canada Post absolutely needs to be looking at service expansion of some sort, and we believe postal banking is probably the best way to do that.

I wouldn't agree that Canada Post's core competencies are only in delivery. We have thousands of members who never deliver anything. They focus on retail and already do passport checks and money transfers and other financial operations, so I think we do have competencies in those areas as well.

[The Chair, Conservative, Tom Lukiwski]

Mr. McCauley, for five minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Welcome back, gentlemen.

We talked a lot about past performance, about Canada Post making this amount of money in the past. I can't help but be reminded of the line from mutual funds that past performance is not indicative of future returns. We don't address the longer term when we talk about Canada Post making $50 million last year, or $80 million the year before, when 10 years out we see the massive decline in the transaction mail or addressed mail.

Do you accept that a huge financial gap is coming from the drop in door-to-door mail volume, and do you see value in some of the switches that have been made under the five-point plan, such as the community mailboxes? Do you think there's a way forward or a further need to convert mailboxes, recognizing that the door-to-door mail volume is dropping fast?

[Mike Palecek]

We believe Canada Post is very well situated to adapt to declining mail volume. As I said earlier, we can see that in the fact that they have been able to adjust their staffing levels in direct accordance with the decline in letter mail already.

We don't need to actually cut services and stick these boxes onto people's front lawns to achieve that. I would argue that there are an awful lot of hidden costs to those boxes, costs that we're not seeing. Just this week, Canada Post—

[Kelly McCauley, Conservative, Edmonton West, AB]

You're saying, going forward, there should be absolutely no more community mailboxes.

[Mike Palecek]

That would be our position, absolutely.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay, that answered my question.

With no changes, status quo, do you accept that we will have financial issues in the future, five or ten years out?

Ernst & Young is a very reputable company. They don't just pull numbers out of the air. These are audited numbers. They don't make up numbers to suit a client. They are painting a very bleak future. Do you accept these numbers?

[Geoff Bickerton]

Your colleague mentioned that some of our members think Ernst & Young and the Conference Board—

[Kelly McCauley, Conservative, Edmonton West, AB]

I'm not talking about the Conference Board, just Ernst & Young—the audited numbers.

[Geoff Bickerton]

Okay. You want to know about the audited numbers from Ernst & Young.

What's going to happen this year? What do you think?

In the first six months, there was $45 million in profits. You heard Mr. Cheeseman yesterday—

[Kelly McCauley, Conservative, Edmonton West, AB]

I'm talking about five years from now, 10 years from now—

[Geoff Bickerton]

I just want to start with this year, and we'll go forward.

[Kelly McCauley, Conservative, Edmonton West, AB]

Sure. We're short on time, though.

[Geoff Bickerton]

He was talking about probably another $45 million in the third-quarter. For the fourth quarter, every year, we're talking about another $120 million.

So, this year, instead of Ernst & Young's $63-million loss, we're going to start with a profit of over $200 million.

Going forward, we will see. But in the first six months of this year, for the first time, additional revenues from parcels are now outstripping the loss of revenues from transaction mail. Plus, you have the changes that we made in our collective agreement around delivery—

[Kelly McCauley, Conservative, Edmonton West, AB]

My understanding—

[Geoff Bickerton]

—and around ad mail, and I would just ask—

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Bickerton, I believe we're running out of time.

I can read the revenues, but my understanding is that the cost to deliver parcels is a lot higher than for transaction mail, so the revenues may be the same. That's what the numbers in Ernst & Young show going forward. Revenues are growing, but the costs are outstripping....

[Geoff Bickerton]

I would only ask you to go to our website and take a look at the changes that we have made to parcel delivery that will have an impact on labour costs.