TD Fall Investing GuideTD Fall Investing Guide
Updated: Thu, 19 Dec 2013 15:15:00 GMT | By Deirdre McMurdy, MSN Money

What Canada Post needs

The future of the Canadian postal service is uncertain — unless someone gets tough.


Deirdre McMurdy

“Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”

 That quote from the ancient Greek writer Herodotus, carved in stone on the New York General Post Office building, is famously linked to the United States Postal Service as a sign of their commitment to delivery. These days, however, that commitment is endangered by massive multi-billion dollar losses for the USPS.

On this side of the border, the sentiments in the above statement no longer apply at all, given the decision by Canada Post Corporation this week to end all door-to-door home delivery within the next five years.  Not to mention the fact that for consumers, less will now cost much more: Canada Post will raise postal rates by a breathtaking 35 per cent in March and allow about 8,000 jobs to go idle through gradual retirements among their aging workforce.

It’s a measure of the gravity of Canada Post’s challenges that consumers were stunned by the severity of the changes — while critics say they are not nearly enough to pull the Crown Corporation out of its financial tailspin.

Trekking to a “CMB” — shorthand for “Community Mail Box”— is something that roughly two-thirds of Canada Post’s 15.1 million customers already do to pick up their mail. But the five million customers who will in future be obliged to do so — all located in urban centres — include many for whom this represents considerable inconvenience, including the elderly and disabled. Many municipal politicians say their cities have little discretionary space to allow for construction of the CMBs, and fear the environmental blowback when at least some residents start dumping all their unwelcome ad flyers on the ground.

The payback for Canada Post, it says, is that the savings from the move, coupled with revenue from the increase, will generate up to $900 million a year — within striking distance of the $1 billion annual losses it expects by 2020. The government has agreed to give the corporation four years of relief from catching up on its huge — and growing — $6.5 billion pension fund shortfall.

As well, Canada Post will close many of its corporate post offices — run by more highly-paid, unionized employees — and replace them with service franchises in retail outlets.

One problem is that it is impossible to know if that $900 million figure is achievable. The only certainty is that the measures involved will lead to further abandonment of Canada Post’s services.

(Continued)
Scroll upScroll down

Recently recommended stories