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Suzanne Gamache, a 31-year Canada Post employee, delivers mail and parcels to business and condo towers in Vancouver. (John Lehmann/The Globe and Mail)
Suzanne Gamache, a 31-year Canada Post employee, delivers mail and parcels to business and condo towers in Vancouver. (John Lehmann/The Globe and Mail)

postal service

Canada Post gears up for pension fight Add to ...

Canada Post will push for deeper concessions from its 60,000-plus workers as it scrambles to fix a badly underfunded pension plan, chief executive Deepak Chopra says.

Making the $17-billion pension plan sustainable is now among his top priorities, Mr. Chopra said in his first interview since announcing controversial moves last week to stem mounting losses at the postal service. That includes ending home delivery and shifting millions of Canadians to community mailboxes.

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“Going forward, we see pensions as a major area of focus because the size of the deficits and the volatility is disproportionate to the size of the business,” Mr. Chopra told the Globe and Mail Monday.

“We need to find sensible solutions that are consistent with the corporation’s ability to sustain the plan.”

Mr. Chopra, 50, who is nearly three years into a five-year term, would not confirm if those concessions would mean higher premiums, reduced benefits, or both.

Canada Post is in the same predicament as thousands of other Canadian companies. It has a shrinking work force and swelling pension obligations at a time when low interest rates are hampering the plan’s investment returns. But unlike the private sector, where companies sometimes make pensions an issue of corporate survival, Canada Post has less leverage to force concessions since it has an obligation to continue delivering the mail.

The post office surprised Canadians last Thursday with its plans, which also include a 35-per-cent stamp price increase March 31, the privatization of more of its 6,400 postal stations and the elimination of as many as 8,000 jobs.

Also last week, Ottawa said it would give Canada Post a four-year reprieve on payments to eliminate the postal service’s unfunded pension liabilities, which now stand at $6.5-billion. Payments into the plan would have reached $1-billion next year amid increasing business losses.

“This is meant to give us time to come up with ideas to put the pension plan on a sustainable footing,” Mr. Chopra explained.

Mr. Chopra expressed frustration about the nostalgia expressed by critics for a postal service that is becoming obsolete in the digital age.

“We have to design a post office of the future that accommodates the mail of the future,” he said, citing prescription drugs, groceries and apparel as well as secure mail, such as passports and license renewal stickers. “The historical model of a letter carrier delivering to the door had limitations.”

The introduction of Apple’s iPad tablet computer in early 2010 marked the start of a precipitous decline in letter-mail volume at Canada Post, according to Mr. Chopra.

“We now have a competitor that looks, feels and behaves like paper,” he said. “We are adjusting to fundamental shifts in technology.”

Letter-mail volumes are declining at roughly five per cent a year, eating into the post office’s largest source of revenue as hundreds of thousands of pieces of mail a year vanish. The goal, he said, is to replace all of those revenues with new revenues from delivering parcels and ad mail.

It’s not about charging Canadians more for less service, but about creating a “next generation” delivery system, he insisted.

“What we are doing is putting a foundation for the next phase of our growth strategy,” Mr. Chopra explained. “We are pressing the reset button.”

He also rejected the notion that raising prices and ending home delivery would cause a downward spiral in its revenue from letters, parcels and ad mail.

On the stamp price hike -- to 85 cents from 63 cents – Mr. Chopra said it now costs the post office 70 cents just to sell a stamp. And that excludes the cost of printing and distribution.

Canada Post, which has posted operating losses in seven of the last eight quarters, has said it expects to become profitable again in 2019.

But Mr. Chopra said the changes announced last week would likely enable the post office to reach that goal even sooner. Under its charter, Canada Post must be financially self-sustaining. The post office estimates the measures announced last week will boost revenue or lower costs by $700-million to $900-million.

Mr. Chopra also dismissed other possible options for fixing the post office. Three-day-a-week delivery was unacceptable to businesses, particularly smaller ones, he said. Distance-based stamp pricing would deprive Canadians of the ability to stay connected. And finally, getting into financial services, as the Canadian Union of Postal Employees has suggested, would have taken the post office into a crowded market that it doesn’t know, he said.

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