Government Operations Committee on May 29th, 2024

[Doug Ettinger]

Okay.

We launched a five-year strategy in 2022 on indigenous reconciliation. We were the first Crown at the time to do that. As I said, we've already improved 45 indigenous post offices in their communities, on their first nations. We have another 25 planned for this year. We have a 5% target on procurement. We're at 4%. We actually have an employee percentage target. We're at 3.3% right now in our organization.

We've built four community hubs on first nations land in the last couple of years—Membertou in Nova Scotia, High Prairie in Alberta, Fort Qu’Appelle in Saskatchewan and Little Current on Manitoulin Island in Ontario. We're very pleased with those. We're working hard on that.

By the way, we've opened six new full-service post offices in rural locations since 2022.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

We have Mrs. Block, please.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

That always catches me by surprise. I'm not sure why.

Mr. Ettinger, we have seen recent reports in the media that Canada Post is going to have a role in the gun buyback program through the shipping of guns. It's my understanding that Canada Post had previously done a risk assessment of being involved in that program and found that there were too many risks for Canada Post to be involved in it.

Is Canada Post being pressured to participate in this program, or was there another risk assessment conducted that found there were not as many risks as previously thought?

[Doug Ettinger]

Thank you. I appreciate that.

I'll say that employee safety is our top priority, and this is unequivocal. For me, it's my clear responsibility to keep our employees safe and the public safe, because post offices are public locations.

We did an internal safety assessment. We were not comfortable with the process that was being proposed in ongoing discussions over the last few months. Our position is that we're just not comfortable with elevated risk.

We're not set up for it. Our buildings are not set up with security or proper storage. The buildings aren't that secure overall in the way I'd like them to be. This is not in our expertise. This should be best left to those who know how to handle guns, how to dismantle them and how to manage them so that no one gets hurt. It is not something that we're comfortable with at all.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

I'm sure you have communicated that back to those who may be suggesting that you should be. What has the response been so far to the assessment that you yourselves have conducted and the answer that you've come up with?

[Doug Ettinger]

Well, our position stays the same, but I know there are discussions ongoing on other alternatives that might make sense.

I've always, on any issue, taken an open-minded approach, because I don't pretend to have all the answers. I'll get the right team on it with the right experts who can try to figure it out.

The discussions continue, but our position is clear, based on the approach that was being considered. We're just not comfortable from the elevated risk assessment of that. I would not live with myself if somebody got hurt—it's almost that simple.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

According to projections prepared for Canada Post by Ernst & Young, Canada Post was projected to have losses of $721 million in 2026, yet it has already reported a full-year net loss of $748 million in 2023. Canada Post has already surpassed loss projections three years out, and you've projected that early. How is this sustainable?

[Doug Ettinger]

It's not. We have to undergo substantial change.

The business model, as I said earlier—I'll take a slightly different angle now—has outlived its useful life. I think it worked at the time when it was a lettermail monopoly. The price of letters covered the cost of delivery at that time. We were able to ride the early wave of e-commerce where we were the only game in town, and we had excess space at the time. In the early days of e-commerce we were able to incorporate those volumes.

Through COVID, things changed a lot. With new competition coming in, that business is under attack—every bit of it. It is a fight. I'm not being dramatic by saying that.

Our business model needs to be updated. It is done, finished, and it probably has been for 10 years. This is not rocket science in lots of ways. For us to be competitive—and I'm confident we can be—you have to have the flexibility to be able to do some of the things I talked about earlier to basically compete head on with these companies that are great strategists and have done lots of great things. We need that flexibility in how we deliver, price, make decisions, operate, invest, and how we support our people right down the line.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Jowhari, please go ahead.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

I would like to welcome Mr. Ettinger.

A number of times in your responses, and even in your opening remarks, you said that the business model has changed. You just reconfirmed that it is not sustainable and that you need to take a different approach. You've highlighted the fact that—

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

And that there's a misalignment.

[Majid Jowhari, Liberal, Richmond Hill, ON]

—Canada Post can compete, but not within the current model and, therefore, that you need a different model.

You put flexibility at the heart of the new model. To the best of my recollection—I was taking notes—you said you needed a different model of competition or flexibility in competition: You needed flexibility in pricing; you needed flexibility in investment; and you talked about flexibility in delivery, for which you gave the example of evening and weekend deliveries.

I'm sure you have looked into alternative delivery models such as drones and central mailboxes, especially in urban areas like Richmond Hill. By the way, thanks a lot for the shout-out to Richmond Hill. In urban areas like that, that model could work very well.

Can you give us examples of flexibility in investments and pricing that would help you? Given your five different recommendations and what you have in mind, it looks like all you need is a green light to be able to do this, and for a green light, you need partnership. As far as delivery is concerned, you need investments and you need a partnership with the postmaster. Can you talk about the investments and the flexibility you need for pricing?

[Doug Ettinger]

The bottom line is that customers' expectations changed a lot through COVID. They basically want three things right now: fast, free and flexible.

The competitors out there have set the bar pretty high. People expect next-day delivery, but not so much same-day delivery. That's the ball game we're competing in right now, but our structure isn't really set up for that.

When I talk about weekend delivery, it's something we have to negotiate with our bargaining units, and we're doing that right now. The cost of weekend delivery is prohibitive for us because of overtime. It will be quite a large number to do that; otherwise, we would have done it already. That's one example.

In terms of pricing, if you look at other markets around the world, the U.K., Australia, France and even the United States have been able to work out a pricing approach based on a calculation that incorporates inflation, costs and what else is going on in the economy, the market and so on. We've had two price increases in the last decade, and we've had none in the last four years. Therefore, we need that funding in order to support the turnaround strategy we're trying to execute with the rest of the organization. That gets into investments in electric vehicles or in centralized mailboxes, which you raised.

By the way, the government's clear direction is to keep door-to-door delivery where it is today and not expand the use of community mailboxes, and we certainly abide by that and respect that strongly. However, the experience with CMBs has actually been quite good over time in that they're secure, safe and convenient, and they're efficient for the organization.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

I have about 45 seconds, and I want to go back to pricing.

You said there were only two price increases. When you talk about the flexibility of pricing, are you talking about something that's out of Canada Post's control and is dictated so that you can't lock in prices for next-day or two-day delivery of x dollars or y dollars, and a price for weekend delivery of z dollars? Can you not do that?

[Doug Ettinger]

We can price our parcels in e-commerce accordingly, as it's a competitive market. What I was referring to there were lettermail rate increases, which are controlled by the government and by GIC approval.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

That's my time.

[The Chair, Conservative, Kelly McCauley]

Thank you, sir.

Mrs. Vignola.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Ettinger, I have a whole series of questions for you. You may have to answer in writing, because I have only two and a half minutes.

A few days ago, we found out that there had been fraud involving Canada Post's microloan program. Were those frauds committed internally or externally? What is the estimated total amount of fraud? What can Canada Post do to recover those amounts?

Earlier, you said that Canada Post needs more flexibility, and you made comparisons with other non-unionized parcel shipping giants. Are you suggesting that unions are currently hindering Canada Post's profitability? Do you see unions as a way to achieve greater flexibility by exchanging ideas and solutions? Where do you stand on unions and how they affect Canada Post and its profitability?

[Doug Ettinger]

Thank you for those. There are a couple in there.

You mentioned a fraud with regard to a bank program. Could I ask which program that was so that I can be clear in my answer?

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

It was a microloan test program that ended just a few months after it was launched, in November or December 2022, if I remember correctly.

[Doug Ettinger]

Okay.

Thank you.

[The Chair, Conservative, Kelly McCauley]

I'm sorry to interrupt.

You only have about 30 seconds, so perhaps you can answer one and respond in writing to the other question.

[Doug Ettinger]

Yes. I'll answer the first question, and we'll get back to you on the other one.

We launched a program in late 2022 with the Toronto-Dominion Bank as our partner. We piloted it, and then we launched it nationally. Their security folks were very good and picked up on some irregularities very quickly, and we suspended it immediately. We did a full review and decided as partners to not go forward with the program.

There were a lot of learnings from that, and we're committed to developing more financial services for rural and remote areas, most importantly, going forward.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

Ms. Mathyssen, welcome to OGGO. I'm afraid you only have two and a half minutes, but please go ahead.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

I'll see what I can do, Mr. Chair.

As I understand it—and I am new to this conversation, but not so new, I guess, to the overall issue—Canada Post is going to be proposing a reduction of postal delivery, potentially, to three days per week. I believe that the union, CUPW, is arguing that instead of looking to that to save money.... You consistently talked about the current and past business models not working and the flexibility that you need.

Going in an entirely different direction would be to expand out and work with the union to ensure that the program that they've had on the books for so long, delivering community power, would look at that expansion, and showing the need for Canada Post in terms of postal banking, other check-ins, community hubs, charging stations, and all of those things.

Is that part of your current negotiations in terms of making the changes that you're looking to make?