By all accounts, it was an extraordinary soirée.
Gathered at Ottawa’s tony Rideau Club for a private dinner were more than a dozen top executives of FedEx Corp., virtually the entire front office of Canada Post Corp., along with three federal cabinet ministers – Finance Minister Jim Flaherty, John Baird, now Government House Leader, and Rob Merrifield, Minister of State for Transport.
FedEx chief executive Fred Smith sat next to Mr. Flaherty, and the pair apparently huddled at length as they dined.
And more than six months later, that’s pretty much all we know about the event. Maybe Mr. Flaherty and Mr. Smith gabbed about the Washington Redskins, of which Mr. Smith is part-owner, or his dabbling in movie-financing (The Blind Side).
Canada Post insists the April 28 dinner, preceded by several hours of meetings, was a routine schmoozing exercise with a good partner and supplier.
“We do shared business with FedEx,” a Canada Post official said, requesting anonymity. “So these exchanges periodically take place on a get-better-acquainted basis.”
The official added that Mr. Smith was there as an “international celebrity business figure,” and a guest of former Canada Post boss Moya Greene, who has since left to take a new job as head of the British postal service.
“Moya … felt [Mr. Smith] would be of interest to our shareholder, the government,” the source added.
The business FedEx currently does for Canada Post includes a lucrative contract to carry all of the postal service’s U.S. and international mail and parcels. Canada Post also sells FedEx services in its retail locations, with a reciprocal arrangement in the United States.
There is no suggestion that any lobbying took place. And none of the 14 FedEx executives are registered under the Lobbyists Registration Act.
But the industry is abuzz with speculation there may be more than idle schmoozing in all this getting-to-know-you between FedEx and Canada’s postal service.
In his last budget, Mr. Flaherty floated the idea of privatizing Crown corporations to pay down its enormous debt. The Harper government insists it has no intention of stripping Canada Post of its monopoly. But Ottawa has said it wants to loosen restrictions on foreign companies collecting letters in Canada for delivery abroad – a business that might appeal to FedEx.
The guessing is that Purolator Courier, which is 91 per cent owned by Canada Post, might eventually form the core of a much tighter bond with FedEx. Purolator recently hired a FedEx veteran, Thomas Schmitt, as its new president and CEO. Mr. Schmitt’s departure was a bit of surprise. He was a rising star at Memphis-based FedEx and most recently headed up a key division.
Short of privatizing Canada Post, Ottawa might entertain the possibility of selling part of Purolator – Canada’s largest courier company – to FedEx, or letting the U.S. giant establish a domestic air cargo beachhead in Canada. Under current Canadian foreign ownership rules, FedEx could own as much as 25 per cent of a domestic cargo airline.
Purolator posted profit of $53-million on revenue of $1.4-billion in 2009. But sales and market share have been slipping.
The big prize would be the contract to carry Purolator’s freight in Canada – business FedEx already does for the U.S. Postal Service. Right now, Kelowna Flightcraft, an air cargo company, owns a minority stake in Purolator and flies all its freight in Canada.
FedEx might also covet the right to fly its planes from point to point, within Canada – so-called cabotage. That way, the company could pick up Canadian cargo, route it through its high-tech U.S. distribution hubs, and then fly the items back to Canada.
Adding to the uncertainty Canada Post is the fact that it’s been without a permanent CEO since July, when Ms. Greene departed. Stewart Bacon, a Canada Post veteran, is filling in as interim CEO until a permanent replacement is found. And all this as the postal service struggles to stay relevant in the Internet age.
Privatization is a thorny subject. Ottawa would face the wrath of Canada Post’s unionized workers, and perhaps many Canadians.
And selling anything to a foreign company might be tricky with economic nationalism on the upswing. Witness Ottawa’s stunning rejection last week of Anglo-Australian BHP Billiton’s hostile bid for Potash Corp. of Saskatchewan.
If Ottawa is seriously considering a quasi-privatization of its piece of the Canadian courier business, a lot of companies would love to get in on the action, one presumes.
But they weren’t at the party.
