JAMES BAGNALL, OTTAWA CITIZEN
The Conservatives obviously like what they see in Canada Post president and CEO Deepak Chopra: his contract has been extended five years effective Feb. 1, 2016, at a salary of roughly $500,000 per year.
Cabinet approved the deal in July – six months before Chopra’s first five-year contract was due to expire. Given the uncertainty created by the Oct. 19 federal election, the new contract likely provides meaningful severance for Chopra should the Conservatives lose power.
The Liberals and New Democrats have promised to halt Canada Post’s ongoing efforts to end home mail delivery, which is expected to produce up to $500 million in annual savings by 2019.
This doesn’t necessarily mean they would fire Chopra if they are elected, but it’s difficult to see the former Pitney Bowes Canada executive sticking around under this scenario. He would have to backtrack on a central part of his plan to turn around the $8-billion-a-year Crown corporation.
Chopra announced 15 months ago that Canada Post would eventually phase out delivery to more than five million households, replacing door-to-door service in many cases with community mailboxes. The corporation converted 100,000 homes last year and expects to introduce community mailboxes to another 900,000 by the end of this year.
The move has sparked protests from many city dwellers, and the mailbox installations have provided unexpectedly vivid backdrops for politicians eager to score points. Montreal Mayor Denis Coderre used a jackhammer this week to try to demolish a concrete foundation for one such community mailbox. In the run-up to the formal launch of the election campaign, Canada Post’s conversion program was one of the single biggest sources of complaints from constituents, according to Ottawa-area NDP MP and candidate Paul Dewar.
“This is shocking,” Dewar said. “Under Chopra, Canada Post chose to eliminate door-to-door service, radically raise the cost of stamps and failed to consult Canadians or local communities. And yet Stephen Harper’s Conservatives have rewarded Chopra with a generous $2.5 million contract, quietly signed just before an election.”
Chopra’s decision to target home delivery was triggered by the inexorable decline in mail volume: the Crown corporation is now delivering 30-per-cent fewer pieces of mail per address than in 2008. Canada Post nevertheless has been generating profits of late, thanks to last year’s hike in the price of stamps and a well-run parcels division. The company’s core business recorded a pre-tax, first-quarter profit of $24 million, up sharply from a loss a year earlier of $27 million during the same period.
Nevertheless, the pressures on Canada Post are relentless. Payroll costs in the first quarter soared 18 per cent year over year (up $70 million) mainly because the company has had to set aside more capital to cover the cost of its employees’ pension plan.
Despite pension assets of nearly $21 billion at year-end 2014, the plan had a deficit of nearly $7 billion – meaning that’s the additional amount required to satisfy all the promises made.
Another risk facing the company is the fact its parcel unit – the source of much of its financial strength – faces the most competition. Canada Post has been aggressively marketing parcel service and electronic products (such as epost, a free electronic mailbox) but it’s not clear it will prevail in this fight against private sector carriers.
Chopra is walking a fine line. On one hand he can offer customers an extensive delivery network. On the other, he intends to shrink his workforce considerably. Canada Post estimates some 15,000 of its 65,000 employees will retire in the next five years and that roughly half the retirees will not be replaced.
In other words, despite recent profits, Canada Post remains under severe stress. If Liberals or New Democrats prevail in the fall election, they will face difficult choices at Canada Post – especially if they eliminate the option of cost savings related to cancelling home delivery.
