Government Operations Committee on Feb. 11th, 2022

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Ms. Fortin. If you have more that you feel you can add to that answer and would submit that to the clerk in writing, it would be appreciated.

We'll now go to the second round, starting with Mr. McCauley for five minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Mr. Chair. Witnesses, thanks for joining us.

Before I start, I want to give a shout-out to one of your Alberta managers, Donald Cooper. He's phenomenal. He's helped our constituents greatly, so thanks very much to him.

I want to get into some of the finances. How much did Canada Post lose last year?

[Manon Fortin]

Thank you for the shout-out to Donald Cooper, a very good employee.

Our published results will say that, as of the third quarter, we had a loss of $492 million.

[Kelly McCauley, Conservative, Edmonton West, AB]

What's the projection for the rest of the year?

[Manon Fortin]

I don't have those specifics with me.

[Kelly McCauley, Conservative, Edmonton West, AB]

It's probably similar, so maybe $650 million or $700 million lost. Last year it was about three-quarters of a billion.

I was part of the original Canada Post study, travelling six years ago. Ernst & Young, of course, forecasted that Canada Post would not be losing that level of money until 2026. You've achieved the goal early. I guess, not congratulations but....

The Canada Post Corporation Act, 5(2)(b) states that you have to be sustainable. This does not look like it's financially sustainable, and it also contradicts the 2018 mandate to assure quality service at a reasonable price. Now it's not necessarily compatible with economic sustainability so that taxpayers are not left on the hook for these massive losses.

Do you see clawing out of these massive losses, which are going to be a billion and a half dollars in two years and getting worse?

[Manon Fortin]

The answer is that we do have a path to sustainability. We have a dual mandate, as you know, to serve every Canadian address while maintaining financial self-sustainability. Two years of a pandemic and the changing needs of Canadians—

[Kelly McCauley, Conservative, Edmonton West, AB]

I'm sorry, but if I can interrupt here, the task force and Ernst & Young clearly articulated four or five years ago that we were on the wrong path financially for financial sustainability. Things have gotten worse than even they predicted.

We seem to be going down the wrong path on the corporate act part in saying “fiscal sustainability”. How are we going to get to fiscal sustainability when we're hemorrhaging three-quarters of a billion dollars a year? I don't put that necessarily on you as opposed to the direction from the government, but taxpayers are going to be on the hook for this eventually.

[Manon Fortin]

We think that investing heavily in our service and our capacity, and by putting Canadians first and by responding to the changing needs of Canadians, it's helping us to move forward to be financially sustainable. That is why we are investing to provide that service to all Canadians with the $4 billion over the next few years, which will increase our capacity by 50% nationally—

[Kelly McCauley, Conservative, Edmonton West, AB]

For the low-profit parcel delivery, though, that's what we're increasing...?

[Manon Fortin]

The capacity that we're increasing is definitely to increase our parcel capacity, yes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right, and how much do we make per dollar on that compared to the declining delivery mail? It's pennies on the dollar versus, what, a per-dollar profit of 68¢ or 67¢ for direct mail, addressed mail?

[Manon Fortin]

I don't have the specifics of that. We could certainly forward them to the committee. What I can tell—

[Kelly McCauley, Conservative, Edmonton West, AB]

I understand the tough situation you're in, but profits are going the wrong way, and we're investing massively into the low-profit area of Canada Post. I don't see how that's going to dig us out of a deficit of three-quarters of a billion dollars, which, again, taxpayers are going to be on the hook for. I'm greatly concerned about taxpayers having to foot this for what is perhaps a political direction on improved service, as opposed to obeying the Canada Post act, which states fiscal sustainability....

[Manon Fortin]

Yes, like I said, our path to financial self-sustainability, we believe, comes from putting Canadians first and responding to the needs that have evolved through this pandemic. Our investments will enable us to address those needs in the next few years.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

Now we'll go to Mr. Jowhari for five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you, Madame Fortin. We appreciate your testimony.

Among the many priorities you highlighted, the expansion of capacity and support for small businesses is the one that stood out for me. Specifically, you talked about $4 billion over four years or so, focused on an initiative to expand capacity and with a focus on improving operations.

I have a couple of questions. My understanding is that we are expanding capacity in Ontario east. One of three construction phases is complete. Can you give us a quick update on that?

Also, help me understand this. When you talk about improving operation, aside from processing time, how does that improvement help in an improved service level, whether it's the cost, whether it's the operational cost or whether it's the service delivery?

If you leave some time for me to ask a question about support for small businesses, I'd really appreciate it.

Why don't we start with the first question?

[Manon Fortin]

I believe the first question was around the Ontario east plant, our second facility in Toronto.

Toronto is our biggest induction point for parcels in Canada. It is where most parcels start and go to wherever their destination is. With online shopping increasing so much during the pandemic, in order to improve our service and to manage that service in Toronto, we have made the decision to invest in a second facility.

That facility is a $470-million investment in Scarborough. One million packages a day is what we will be able to process there. That's 50% more than the current capacity. It will have state-of-the-art automation equipment, which facilitates and accelerates the processing of those items in facilities and helps get them to their destinations—

[Majid Jowhari, Liberal, Richmond Hill, ON]

This is the area that I want to focus on.

I understand capacity building. I understand that our processing capability goes up. I understand that we can process a larger volume. At the end of the day, though, it is helping us to be able to improve our service delivery from what point to what point? For example, from processing to getting it to the end customer, previously it would have taken one and a half days, and now it's going to take x days. Could you quickly expand on that?

[Manon Fortin]

Sure. There are two elements to that answer. First, if you don't have the capacity to process all of the volumes you get, which is sort of what happened at the beginning of the pandemic when we had the parcel surge, you end up not being able to move the product quickly enough, so there are service impacts all along the way. We don't want to repeat that experience.

The equipment that we provide in those facilities provides us a much deeper sort. Our network has changed. The network has evolved. Where people live has evolved. Think of Ontario and what's happened to some of those communities north of Toronto and how the communities have changed there. The parcel volumes there have changed as well.

The automation provides a deeper sort to avoid hand-off and multiple hand-offs between each of our operations—

[Majid Jowhari, Liberal, Richmond Hill, ON]

You mean improving the service delivery by how much—10%, 20%, 5%?

[Manon Fortin]

We've yet to land on the service improvement, but we think it will be significant.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay. Thank you.

You touched on support for small businesses, especially during these times when we are doing a lot of business-to-customer online transactions. How's that impacted? How are you helping small businesses?

[Manon Fortin]

Perhaps I'll have my colleague Mr. Pitre answer that question.

[Serge Pitre]

Basically, for small businesses, the first thing I would mention is that all the investments we're making in the network would benefit all markets. Whether you're a small customer or a major account, you go through the same process and the same efficiencies when we invest in the network.

Specifically for small businesses, we've been investing a lot in helping them grow their business. We have a lot of webinars with them on how to manage e-commerce, how to build sites, how to manage packaging and how to reduce costs. Again, most of these small businesses don't have the expertise or the resources to do that. Canada Post is there for them.

Last year we helped them be able to ship, because most of them were not open to serve customers directly, so we helped them online. We also had mail marketing. We helped them reach out to potential customers. This is what we do at Canada Post. Even in the last three years—and hopefully some of you received one at home—we introduced what we call a holiday catalogue around the holiday season. It was a mix of major accounts, small customers and very small customers who were able to advertise across the country. We mailed over 800,000—