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New president and CEO of Canada Post Deepak Chopra (Pawel Dwulit/THE CANADIAN PRESS)
New president and CEO of Canada Post Deepak Chopra (Pawel Dwulit/THE CANADIAN PRESS)

Is Canada Post's pink slip in the mail? Add to ...

Drive north of Toronto along Hwy. 400 towards Barrie, Ont. Lining both sides of the road are thousands of new homes that didn't exist five years ago. It's a similar landscape in B.C.'s Lower Mainland and the Kanata suburbs of Ottawa.

Now, think of how many Christmas cards you got in the mailbox this season compared with past years.

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That, in a nutshell, is the daunting business challenge facing Canada Post's newly named chief executive officer, Deepak Chopra, an Indian-born accountant and former Pitney Bowes Canada boss.

More work, and dwindling revenue from the Gmail-Facebook-Twitter generation.

Every year, the postal service is delivering mail to roughly 200,000 new addresses. But every year, Canadians are getting fewer pieces of mail, and the rate of decline is accelerating. In 2009, Canada Post delivered an average of 334 pieces of mail to 14.9 million addresses. That's down 13 per cent from an average of 377 pieces to 14 million addresses in 2005.

Throw in rising operating costs, a large and expensive union workforce, a pension shortfall that reached $2-billion in 2009, and aging plants, and Mr. Chopra might well wonder why he ever took the job.

In a welcome message to Canada Post employees this week Mr. Chopra rhetorically asked - and then answered - that exact question. In spite of what others see as "insurmountable challenges," Canada Post remains a "national treasure," he assured workers.

"We are the only organization that touches every Canadian address every business day," Mr. Chopra explained, saying he intended to exploit that advantage to find new revenue sources. He didn't however, hint at what those new sources might be.

Mr. Chopra takes over Feb. 1 from interim CEO Stewart Bacon after an exhaustive seven-month search for a successor to veteran civil servant Moya Greene, who left Canada Post to guide Britain's Royal Mail towards privatization.

Other critics wonder why Canada Post exists at all as a Crown Corporation. Michael Warren, the Crown Corp.'s first CEO and now a business consultant, says Ottawa should get out of the way and let the private sector take over the mail business.

"The main raison d'être for Canada Post is quite rapidly being eroded by other means of moving messages and money," Mr. Warren said. "Canada Post faces a real question of how it goes forward as a Crown Corporation … It's an agency whose primary products are being challenged on every front."

The Harper government, however, insists outright privatization of the mail service is off the table. What it has done is grant the Crown Corporation vast new borrowing powers to help it modernize its distribution technology (it recently floated $1-billion in new bonds). Ottawa also gave the green light to a 20-per-cent rate increase by 2014 and expanded powers to enter unspecified new lines of business.

In the past, Canada Post has depended heavily on squeezing cost savings out of its vast operations to keep the company from slipping into the red. Now, with expanded borrowing, Canada Post is pouring money into long neglected and outmoded sorting plants and technology.

"That gives Mr. Chopra a fighting chance to do a good job," argued Robert Campbell, president of Mount Allison University and chairman of a 2008 federal advisory panel that recommended many of the changes now being implemented at Canada Post.

The key challenge will be to get the most out of Canada Post's modernized sorting plants and distribution system, Mr. Campbell said. If Mr. Chopra falls back on his accounting instincts, and merely tries to squeeze expenses, his tenure could be troubled.

"It's not solvable on the cost side alone," he said. "He has to generate revenue."

Mr. Warren remains skeptical. He said more efficient distribution isn't enough to offset the powerful, but conflicting forces of universal mail delivery and dropping volumes. And with an aging 70,000-strong workforce and massive pension obligations, it will take extraordinary productivity gains to keep its unit costs anywhere near private-sector rivals.

"The government isn't stepping up to the real issues," Mr. Warren said. "It's guaranteeing all those expenditures, but the likelihood is that Canada Post will still be struggling in the free market communications business."

One industry insider, who declined to be named, said Mr. Chopra faces a host of challenges.

"Canada Post is a logistics company. Pitney Bowes is a service company," the source pointed out. "And he's going into a massive union issue, which he didn't have to deal with at Pitney Bowes."

Meanwhile, there is widespread speculation in the industry that the government's next step will involve at least a partial sale of Canada Post's 91-per-cent stake in Purolator Courier Ltd., Canada's largest courier company. Purolator generated a modest pretax income of $52.9-million on revenue of $1.4-billion in 2009. Without those meagre profits, Canada Post would be barely breaking even. Purolator accounts for less than 20 per cent of Canada Post's revenue, but virtually all of its profits as Internet shopping keeps the parcel business growing.

Even so, the betting is that Purolator will strike some sort of joint venture with FedEx Corp., which has long coveted a bigger piece of the Canadian market. Purolator recently hired a rising FedEx star, Thomas Schmitt, as its CEO. FedEx and Purolator are already close business partners. 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.

Follow on Twitter: @barriemckenna

 

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