Government Operations Committee on April 8th, 2024

[The Chair, Conservative, Kelly McCauley]

I call this meeting to order.

Good morning, everyone. Welcome to meeting number 115 of the House of Commons Standing Committee on Government Operations and Estimates.

Pursuant to Standing Order 108(3)(c) and the motion adopted by the committee on Monday, February 5, 2024, the committee is meeting to consider matters related to postal service in Canada's rural and remote communities.

I will remind you not to put your earpieces next to the microphones, as doing so causes feedback and potential injury.

Colleagues, before we start, I want to note the passing of a friend of OGGO, Mr. Jim Hopson. Mr. Jowhari was with us when we were doing our cross-Canada Canada Post tour, and Mr. Hopson was one of the four people who wrote the “Canada Post in the Digital Age” report ; he also appeared several times at OGGO on Canada Post. He was famous with the Saskatchewan Roughriders as well, and helped the Roughriders to a Grey Cup. I just wanted to mention his passing and let his family know we thank Mr. Hopson for his service to our committee.

I'd like to welcome our witnesses today. We have Mr. Brisson and Mr. Yee joining us.

Let me express my disappointment that you chose not to be here in person at our committee. I hope in the future that Canada Post will actually send people in person.

I understand there's a five-minute opening statement from one of you.

Please go ahead, Mr. Brisson.

[Alexandre Brisson, Vice-President, Operations and Engineering, Canada Post Corporation]

Thank you, Mr. Chair.

Thank you to the chair and to committee members for inviting Canada Post to join you today.

I’m Alexandre Brisson, vice-president of operations and engineering, and this is Michael Yee, vice-president of retail and financial services.

Before we get to your questions, I would like to share some important context for today’s discussion.

Canada Post is proud to serve to all Canadians. We deliver almost 6.5 billion letters and parcels to nearly 17.4 million addresses in Canada.

Providing postal service to all households and businesses is part of our core mandate. It’s defined in the Canada Post Corporation Act of 1985, which created the postal system as we know it.

We fulfill this mandate by following the service expectations set out in the Canadian Postal Service Charter, which has been in place since 2009.

It is our duty to serve Canadians no matter where they live, including rural, remote and northern communities—and we recognize that they’re the ones who need us the most.

The service we provide to rural communities is vital. We have 3,211 post offices serving these areas. This is 633 more post offices than in urban areas.

We bring mail and parcels in and out by trucks, trains and planes. This includes more than 280 flights each week as some areas are only accessible by air for a large portion of the year.

In some places, we are the only delivery service they have. Because the cost of delivering is higher, not all companies serve rural communities. In fact, they often rely on us to make their last-mile deliveries.

We remain a lifeline that connects the residents and businesses of these communities to the rest of Canada and the world. We fully understand this responsibility—and we proudly fulfill it.

We have teams dedicated to maintaining service and improving it where possible. For instance, last year, we opened our second full-service post office in Iqaluit, as well as three full-service post offices in northern and indigenous communities. We invested $1.4 million to make improvements across our rural network. Over the past few years, we have opened four community hub post offices, which offer expanded services. We are also supporting dealers who provide postal services in northern and remote communities by helping to offset their higher costs.

While we are dedicated to improving services where possible, we do face significant challenges.

For example, when a postmaster retires or leaves their position in a rural, remote or northern community, it can be very difficult to find a replacement. Sometimes we can lose a post office for reasons beyond our control, such as a fire or natural disaster. In this case, finding a new suitable location can be incredibly challenging.

When this happens, we have established processes that we follow. This involves consulting with community leaders to determine how best to continue services in their area. Last year, through our community outreach process, we were able to maintain 100 rural post offices in need of a new postmaster or a new location.

Our guiding principle is to ensure every Canadian has access to postal service, as laid out in the Canadian Postal Service Charter, but we also have to operate within our means.

The reality is that mail has been in decline since 2006. Back then, we delivered almost 5.5 billion letters. Now we deliver less than half of that volume.

At the same time, the number of addresses we deliver to has been growing by more than 200,000 a year—which means the cost of delivering mail keeps going up.

While mail volumes declined, our parcel volumes increased, driven by online shopping. We were able to pivot and develop our parcel business. However, as Canada emerged from the pandemic, changes in the competitive delivery landscape accelerated. We’re now facing intensifying competition by low-cost operators who have disrupted the parcel delivery market in just a few short years. As a result, our market share has significantly dropped.

We will be releasing our annual report in the coming weeks, which will provide more insight into the gravity of our financial situation.

Though we face these significant challenges, I want to emphasize that we—

[The Chair, Conservative, Kelly McCauley]

I'm sorry, Mr. Brisson—

[Alexandre Brisson]

—remain committed to serving all Canadians, in every community.

[The Chair, Conservative, Kelly McCauley]

We have a five-minute opening, sir, and we're past that. I need you to wrap up, please.

[Alexandre Brisson]

Yes, of course.

We will continue to maintain, and invest in, our rural network where we can, as we strive to balance our challenges across our postal system.

Thank you for this opportunity to speak.

We are now ready to answer questions.

[The Chair, Conservative, Kelly McCauley]

Thank you very much, sir.

We'll start with Mrs. Block for six minutes.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair.

Welcome to our witnesses today on the first day of this very important study, certainly for those communities in rural Canada that continue to be deeply concerned about the kind of service they are receiving from Canada Post.

I'm a member of Parliament from Saskatchewan. I represent a very large rural riding and I have actually heard from a number of constituents and communities.

Canada Post has been running fairly significant deficits for a number of years now. We've been made aware of that. In January, it was announced that Canada Post had sold two of its businesses, Innovapost Inc. and SCI Group Inc. It was a move towards refocusing itself on the needs of Canadians and focusing on the core business of Canada Post.

Can you tell us if these companies that were sold were running profits, or were they also running deficits?

[Alexandre Brisson]

When we sold those companies, it was part of our strategic plan—our transformation plan, that is. Canada Post, as you know, is now operating in a very different market, moving from a letter mail-centric company to a parcel-centric company. That's no small transformation.

The committee has to see these two transactions in light of that strategy to refocus, as I said, our activities on our core postal and logistics service. SCI was a 3PL, a third-party logistics company, and was a profitable company. As part of our strategy, we actually decided to sell it, and that's management's focus, back on our own operations and activities, so—

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

I will stop you there, because I have a follow-up question to that answer you have just given: Why would Canada Post sell profitable businesses that could be used to subsidize its core business?

[Alexandre Brisson]

First, on the financial side, you will see the transaction in our own financial statements. You're going to have access to these numbers.

They are part of the Canada Post Group of Companies. It's very important that we're able to stay focused on our strategy. It's a question of looking at the Canada Post Group of Companies and actually creating synergies in that Canada Post Group of Companies. That's where our long-term transformation strategy did not involve SCI, going forward. That's critical for us, so that we're able to focus on our core business, which is postal service to all Canadians.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Yet you continue to run deficits. I found a quote regarding the sale of SCI. Canada Post media relations person Lisa Liu stated:

It's a great company but no longer fit[s] the corporation's long-term strategy and growth plans.

Can you tell us what plans or what strategy forced Canada Post to sell this company even though it's a profitable company? You've mentioned that it didn't fit, but can you tell us why it didn't fit within your strategy?

[Alexandre Brisson]

When you think about strategy and the long-term repositioning of Canada Post, we've got to look at the Canada Post Group of Companies and be clear on what synergies exist within the group so we can actually better serve our customers and Canadians. From that standpoint, SCI, being a warehousing 3PL company, was not one of those building blocks, so it made sense from a management standpoint to look at what we had and to refocus Canada Post on its logistics activities to serve Canadians.

That's where 100% of our focus is going. It's going forward, because that's what Canada needs us to do.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

As I mentioned, I represent a very large rural riding in the province of Saskatchewan. With the growing financial losses that Canada Post is experiencing, what are the implications for rural and remote communities that already don't receive the same level of service as urban centres?

[Alexandre Brisson]

We cannot associate the financially challenging position that we're in against the service we provide. Those are two separate things. We have a service charter that was approved in 2009. We developed a supply chain and an operating plan to serve Canadians according to that charter. Day in and day out, and year over year, we do not modify the service we provide to Canadians based on our financial position. I'm from operations, and we operate this plan every day to provide the service. It's not a question of cutting back on service as a result of having a tough financial time.

Really, they are two separate discussions. That's where the transformation of Canada Post is so critical, but we do not curb the services we provide just because we're having a tough couple of years financially.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Are you providing a different level of service to rural Canadians because you choose to or because you can't afford to provide a better service to rural Canadians?

[Alexandre Brisson]

The way I would say it is that we have a service charter that's mandated by the government. It was approved in 2009. We comply with and abide by that service charter. That's the way our delivery and service plan are being executed every day of the week.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Mr. Jowhari, please go ahead.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Let me continue along the line of questioning that my colleague Mrs. Block started.

There was a news article published by CBC this past January. It said:

Canada Post announced it will sell its in-house IT business, Innovapost, to Deloitte Canada. As part of the outsourcing deal, Canada Post will maintain an IT leadership team while most of Innovapost's 750 person workforce is absorbed by Deloitte.

Canada Post chose to outsource its IT operation to reduce costs. Has this outsourcing been effective in reducing the operating costs?

[Alexandre Brisson]

Thank you for the question.

We have to see that transaction in light of our strategy for the long term. If we look at the logistics industry—

[Majid Jowhari, Liberal, Richmond Hill, ON]

The question was this: Has it reduced the operating costs?

[Alexandre Brisson]

We're in the process of going through with that transaction, so it's too early, at this point, to answer that question. The transition is taking place as we speak.

[Majid Jowhari, Liberal, Richmond Hill, ON]

You don't know whether it would reduce the cost, yet Canada Post made the choice to outsource it.

[Alexandre Brisson]

We made the choice to go through with that deal because strategically, for us, technology is more and more important in running a logistics business. We all see and know, as consumers, the importance of information in the logistics business now—tracking our parcels and all of the data around the goods we order. We see our competition investing massively in technology, so we have to see that transaction in a strategic light.