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A Purolator delivery truck (Glenn Lowson for The Globe and Mail)
A Purolator delivery truck (Glenn Lowson for The Globe and Mail)

Purolator shakeup sparks talk of closer ties with FedEx Add to ...

Purolator Courier Ltd., Canada's largest courier company, has let go of eight top executives in a housecleaning it says will simplify its management ranks, but one that rivals suspect may herald much closer ties with U.S. package delivery giant FedEx

The management shakeup comes barely two months after Canada Post Corp., which owns 91 per cent of the Mississauga, Ont.-based company, installed veteran FedEx executive Thomas Schmitt as Purolator president and chief executive officer.

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The moves this week reflect Mr. Schmitt's commitment "to a structure of maximum collaboration across all our lines of business," said Sarah Hamza, Purolator's director of government relations.

"The revised changes brought with them some difficult but important decisions that allow Purolator to move forward simply, and with a renewed focus on the current and future needs of our customers and teammates nationwide," Ms. Hamza said.

Purolator would not identify the executives involved. But industry sources said they include several senior vice-presidents and division heads as well as a clutch of Ontario-based sales executives.

Officials at Canada Post declined to comment.

The moves come as Canada Post struggles to leverage Purolator's leading market share in the intensely competitive courier business. In addition to competing with Canada Post, Purolator also competes in various services with FedEx, United Parcel Service, DHL and Canpar.

Canada Post astutely timed its entrée into the courier business in 1993, buying a majority stake in Purolator just as the Internet was emerging as a major threat to its traditional letter business. And the company has been a steady, though modest, source of profits ever since.

Last year, Purolator generated modest pretax income of $52.9-million on revenue of $1.4-billion. Both profit and revenue were down sharply - results that Canada Post blamed on the global financial crisis and increased competition. Sales fell 8 per cent compared with 2008, but profit plummeted 44 per cent as courier companies slashed prices to keep business during the recession.

The post office's mixed success with Purolator has triggered speculation that it might eventually put the subsidiary on the block as part of the Harper government's push for more privatization. At least three different companies have expressed interest in acquiring Purolator in recent years, according to sources.

Mr. Schmitt's recent arrival sparked industry buzz that Canada Post and Purolator would move to cement ties with FedEx. Even before Mr. Schmitt was hired, Canada Post and Purolator did a lot of business with FedEx.

"Canada Post would like to have FedEx as a minority partner in Purolator," said one industry official, who declined to be named.

In April, Canada Post hosted a special dinner in Ottawa for 15 top U.S. and Canadian FedEx executives. Also at the dinner were three Canadian cabinet ministers, including Finance Minister Jim Flaherty and John Baird, the government house leader, who then was transport minister.

FedEx flies Canada Post's U.S. and offshore mail and sells FedEx's foreign-bound courier services in its retail stores. It also markets Smart Post in Canada, a FedEx parcel service.

FedEx has long coveted a much bigger presence in Canada, including the right to carry Canadian freight via its U.S. hubs - something it currently can't do under Canadian law. That could for example, allow FedEx to fly Purolator parcels and packages to points within Canada, bypassing its own sorting centers here.

Purolator accounted for 18 per cent of Canada Post's $7.3-billion revenue last year, and the post office said in its annual report that Purolator is "a strategic asset" that dovetails with its focus on the business market.

Purolator operates a fleet of 4,000 trucks and has 11,000 employees, most of whom are unionized.

 
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